UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM TO
Commission File Number 001-39219
Revolution Medicines, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
700 Saginaw Drive
Redwood City, CA
(Address of principal executive offices)
47-2029180
(I.R.S. Employer
Identification No.)
94063
(Zip Code)
Registrant’s telephone number, including area code: (650) 481-6801
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock $0.0001 Par Value per Share
Warrants to purchase 0.1112 shares of common stock expiring 2026
Trading
Symbol(s)
RVMD
RVMDW
Name of each exchange on which registered
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐No ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
☒
☐
Non-accelerated filer
☐
Smaller reporting company
Emerging growth company
☐
☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the Registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the Registrant as of June 30, 2023 (the last business day of the Registrant’s most recently completed second fiscal
quarter) was approximately $2,757 million, based on the closing price of the Registrant’s common stock, as reported by the Nasdaq Global Select Market on June 30, 2023 of $26.75 per share.
The number of shares of the Registrant’s Common Stock outstanding on the Nasdaq Global Select Market as of February 21, 2024 was 164,690,408 (excluding 5,560,000 contingent earn-out
shares).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement relating to the Registrant’s 2024 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on
Form 10-K to the extent stated herein. The proxy statement will be filed with the Securities and Exchange Commission within 120 days of the Registrant’s fiscal year ended December 31, 2023.
PART I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved.]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements concerning our business, operations and financial performance and condition, as
well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that
are not statements of historical facts may be deemed to be forward-looking statements. These statements involve known and unknown risks, uncertainties
and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,”
“could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,”
“would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable
terminology. These forward-looking statements include, but are not limited to, statements about:
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the scope, progress, results and costs of developing our product candidates or any other future product candidates, and conducting preclinical
studies and clinical trials;
the scope, progress, results and costs related to the research and development of our pipeline;
the timing of and costs involved in obtaining and maintaining regulatory approval for any of current or future product candidates, and any
related restrictions, limitations and/or warnings in the label of an approved product candidate;
our expectations regarding the potential market size and size of the potential patient populations for our product candidates and any future
product candidates, if approved for commercial use;
our ability to establish and maintain new collaborations, licensing or other arrangements and the financial terms of any such agreements;
our commercialization, marketing and manufacturing capabilities and expectations;
the rate and degree of market acceptance of our product candidates, as well as the pricing and reimbursement of our product candidates, if
approved;
the implementation of our business model and strategic plans for our business, product candidates and technology, including additional
indications for which we may pursue;
the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates, including the
projected term of patent protection;
our expectations regarding our ability to obtain, maintain, enforce and defend our intellectual property protection for our product candidates;
estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital;
developments and projections relating to our competitors and our industry, including competing therapies and procedures;
regulatory and legal developments in the United States and foreign countries;
the performance of our third-party suppliers and manufacturers;
our ability to attract and retain key scientific or management personnel; and
other risks and uncertainties, including those listed under the caption “Risk Factors.”
We have based these forward-looking statements largely on management’s current expectations, estimates, forecasts and projections about our business and
the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve
known and unknown risks, uncertainties and other factors that are in some cases beyond our control. These forward-looking statements speak only as of the
date of this Annual Report on Form 10-K and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors”
and elsewhere in this Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which
cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances
reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-
looking statements. Except as required by applicable law, we do not plan to publicly update or revise any
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forward-looking statements contained herein until after we distribute this Annual Report on Form 10-K, whether as a result of any new information, future
events or otherwise.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon
information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such
statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon
these statements.
Investors and others should note that we may announce material business and financial information to our investors using our investor relations website
(ir.revmed.com), Securities and Exchange Commission (SEC) filings, webcasts, press releases and conference calls. We use these mediums, including our
website, to communicate with our members and public about our company, our products and other issues. It is possible that the information that we make
available may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that
we make available on our website.
The principal risks and uncertainties affecting our business include the following:
Summary of Material Risks Associated with Our Business
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We are a clinical-stage precision oncology company with a limited operating history and no products approved for commercial sale. We have
incurred significant losses since inception. We expect to incur losses for at least the next several years and may never achieve or maintain
profitability, which, together with our limited operating history, makes it difficult to assess our future viability.
We have never generated revenue from product sales and may never be profitable.
We are subject to various risks related to the acquisition of EQRx.
We will require substantial additional financing to achieve our goals, which may not be available on acceptable terms, or at all. A failure to
obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization
efforts.
We are early in our development efforts. Our business is dependent on the successful development of our current and future product
candidates. If we are unable to advance our current or future product candidates through clinical trials, obtain marketing approval and
ultimately commercialize any of our product candidates, or experience significant delays in doing so, our business will be materially harmed.
Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would
adversely affect our ability to obtain regulatory approvals or commercialize our product candidates on a timely basis or at all, which would
have an adverse effect on our business.
Historically, direct inhibition of any RAS protein has been challenging due to a lack of tractable, or “druggable,” binding pockets. Given this
approach is unproven, it may not be successful.
The results of preclinical studies and early-stage clinical trials may not be predictive of future results.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise be
adversely affected.
We are currently developing, and may in the future develop, our product candidates in combination with
other therapies, which exposes us to additional risks.
We face significant competition, and if our competitors develop and market products that are more effective, safer or less expensive than our
product candidates, our commercial opportunities will be negatively impacted.
If we and our collaborators are unable to obtain and maintain sufficient patent and other intellectual property protection for our product
candidates and technology, our competitors could develop and commercialize products and technology similar or identical to ours, and we
may not be able to compete effectively in our market or successfully commercialize any product candidates we may develop.
The summary risk factors described above should be read together with the text of the full risk factors below in the section entitled “Risk Factors” and the
other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other
documents that we file with the SEC. The risks summarized above or described in full below are not the only risks that we face. Additional risks and
uncertainties not precisely known to us or that we currently deem to
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be immaterial may also materially and adversely affect our business, competitive position, financial condition, results of operations, cash flows and growth
prospects.
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Item 1. Business.
Overview
PART I
We are a clinical-stage precision oncology company developing novel targeted therapies for RAS-addicted cancers. We possess sophisticated structure-
based drug discovery capabilities built upon deep chemical biology and cancer pharmacology know-how and innovative, proprietary technologies that
enable the creation of small molecules tailored to unconventional binding sites. Guided by our understanding of genetic drivers and adaptive resistance
mechanisms in cancer, we deploy precision medicine approaches to inform innovative monotherapy and combination regimens.
Our research and development pipeline comprises RAS(ON) inhibitors that bind directly to RAS variants, which we refer to as RAS(ON) Inhibitors, and
RAS companion inhibitors that target key nodes in the RAS pathway or associated pathways, which we refer to as RAS Companion Inhibitors. Our
RAS(ON) Inhibitors are designed to be used as monotherapy, in combination with other RAS(ON) Inhibitors and/or in combination with RAS Companion
Inhibitors or other therapeutic agents. Our RAS Companion Inhibitors are designed primarily for combination treatment strategies centered on our
RAS(ON) Inhibitors.
RAS(ON) Inhibitors
Our RAS(ON) Inhibitors are based on our proprietary tri-complex technology platform, which enables a highly differentiated approach to inhibiting the
active, GTP-bound form of RAS, which we refer to as RAS(ON). We are developing a portfolio of compounds that we believe are the first and only
RAS(ON) Inhibitors to use this mechanism of action. We believe that direct inhibitors of RAS(ON) suppress cell growth and survival and are less
susceptible to adaptive resistance mechanisms recognized for RAS(OFF) Inhibitors. We are evaluating our RAS(ON) Inhibitors alone and in combination
with other drugs and investigational drug candidates, including with other RAS(ON) Inhibitors in RAS(ON) Inhibitor doublet regimens.
We are advancing a deep pipeline of RAS(ON) Inhibitors, including both our innovative RAS(ON) multi-selective inhibitor (RMC-6236) and a series of
mutant-selective inhibitors (led by RMC-6291 and RMC-9805). Together, we consider these three development-stage candidates as the first wave of
RAS(ON) inhibitors that we are advancing through clinical development.
RMC-6236
RMC-6236, our RAS(ON) multi-selective inhibitor, is designed as an oral, RAS-selective tri-complex inhibitor of multiple RAS(ON) variants containing
cancer driver mutations at all three of the major mutation hotspot positions, G12, G13, and Q61. RMC-6236 inhibits all three major RAS isoforms,
suppressing the mutant cancer driver and cooperating wild-type RAS proteins.
A monotherapy dose-escalation Phase 1/1b study of RMC-6236, which we refer to as the RMC-6236-001 study, is ongoing. On October 13, 2023, we
reported updated interim safety, pharmacokinetic (PK) and circulating tumor DNA (ctDNA) data from the RMC-6236-001 study as of a September 11,
2023 data cut-off date. These data demonstrated that RMC-6236 was generally well tolerated across dose levels in patients with solid tumors. These data
also demonstrated dose-dependent increases in exposure at a steady state with minimal accumulation after repeated daily oral dosing, which we believe is
compatible with once-daily dosing. Reductions in ctDNA variant allele frequency were observed for multiple KRAS-mutated alleles in multiple tumor
types, indicative of anti-tumor activity by RMC-6236.
On October 22, 2023, we reported updated interim safety and anti-tumor activity data for dose levels of 80 mg daily and above from the RMC-6236-001
study as of an October 12, 2023 data cut-off date. These data demonstrated that RMC-6236 was generally well tolerated across the dose levels analyzed as
of the cut-off date. These data also demonstrated preliminary evidence of clinical activity in non-small cell lung cancer (NSCLC) patients and pancreatic
ductal adenocarcinoma (PDAC) patients.
On January 9, 2024, we reported that, with additional follow-up after the October 2023 data reports described above, the profile of RMC-6236 remained
relatively consistent with the description in the October 2023 reports, the objective response rate (ORR) for both NSCLC and PDAC patients had improved
and the disease control rate (DCR) remained consistent.
We currently expect to disclose updated clinical safety, tolerability and activity data from the RMC-6236-001 study for patients with NSCLC and for
patients with PDAC in the second half of 2024. We also currently expect to disclose initial data from Phase 1 expansion cohorts in the RMC-6236-001
study in tumor types beyond NSCLC and PDAC and genotypes beyond KRAS G12X in the second or third quarter of 2024.
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We are also evaluating RMC-6236 in a series of combination regimens. We are conducting an open-label Phase 1b/2 platform study evaluating our
RAS(ON) Inhibitors in combination with standard(s) of care in advanced NSCLC patients, which we refer to as the RMC-LUNG-101 study. There are
currently two ongoing subprotocols under the RMC-LUNG-101 study, one evaluating our RAS(ON) G12C inhibitor, RMC-6291, which we refer to as the
RMC-LUNG-101A study, and one evaluating RMC-6236, which we refer to as the RMC-LUNG-101B study. RMC-LUNG-101B is a Phase 1b/2 dose
exploration and dose expansion study evaluating RMC-6236 in combination with pembrolizumab, with or without chemotherapy, in patients with RAS-
mutated NSCLC. We currently expect to disclose initial clinical PK, safety, tolerability and activity data from the RMC-LUNG-101B study in the second
half of 2024.
We are also conducting an open-label Phase 1b clinical trial of RMC-6291 in combination with RMC-6236, which we refer to as the RMC-6291-101 study.
This study is ongoing, and we currently expect to disclose initial clinical PK, safety, tolerability and activity data in the second half of 2024.
Planning is also underway for one or more combination clinical trials for RMC-6236 with standard of care therapies in first-line treatment settings.
We are planning a global randomized Phase 3 trial comparing RMC-6236 against docetaxel in patients with RAS-mutated NSCLC who have been treated
with immunotherapy and platinum-containing chemotherapy. The study design for this planned trial is subject to change based on regulatory authority
feedback. We currently expect to initiate this study in the second half of 2024.
We are also planning a global randomized Phase 3 trial comparing RMC-6236 against a physician’s choice of chemotherapy regimens in patients with
previously treated RAS-mutated PDAC. The study design for this planned trial is subject to change based on regulatory authority feedback. We currently
expect to initiate this study in the second half of 2024.
RMC-6291
RMC-6291 is designed as a RAS(ON) oral tri-complex G12C-selective inhibitor. It is designed to exhibit subnanomolar potency for suppressing RAS
pathway signaling and growth of RAS G12C-bearing cancer cells and is engineered to be highly selective for RAS G12C over wild-type RAS and other
cellular targets. RMC-6291 is designed to be differentiated from first-generation KRAS(OFF) G12C inhibitors, which sequester the KRAS(OFF) G12C
form, by its mechanism of directly inhibiting the RAS(ON) G12C form.
A monotherapy dose-escalation Phase 1b study of RMC-6291, which we refer to as the RMC-6291-001 study, is ongoing.
On October 13, 2023, we reported interim preliminary safety and anti-tumor data from the RMC-6291-001 study as of an October 5, 2023 data cut-off date.
The data demonstrated that RMC-6291 was generally well tolerated across dose levels. These data also demonstrated preliminary evidence of clinical
activity in patients with KRAS G12C NSCLC previously treated with, or naïve to, a KRAS(OFF) G12C inhibitor and preliminary evidence of clinical
activity in patients with KRAS G12C colorectal cancer (CRC) who were naïve to treatment with a KRAS(OFF) G12C inhibitor. We observed that RMC-
6291 was orally bioavailable and demonstrated dose-dependent pharmacokinetics and that reduction in ctDNA of the KRAS G12C allele across doses was
correlated with clinical response. We believe these data provided preliminary evidence of clinically meaningful differentiation of RMC-6291 from
KRAS(OFF) G12C inhibitors.
On January 9, 2024, we reported that relative to the October 13, 2023 report, the profile of RMC-6291 in the RMC-6291-001 study had remained relatively
stable. We continue dosing patients at a 200 mg twice daily (BID) dose in this study.
As discussed above in the “RMC-6236” section, we are evaluating RMC-6291 in the RMC-LUNG-101A study, which is a Phase 1b/2 dose exploration and
dose expansion study evaluating RMC-6291 in combination with pembrolizumab, with or without chemotherapy, in patients with RAS-mutated NSCLC.
We currently expect to disclose initial clinical PK, safety, tolerability and activity data from the RMC-LUNG-101A study in the second half of 2024.
As also discussed above in the “RMC-6236” section, we are conducting an open-label Phase 1/1b clinical trial of RMC-6291 in combination with RMC-
6236, which we refer to as the RMC-6291-101 study.
RMC-9805
RMC-9805 is designed as a RAS(ON) oral tri-complex G12D-selective inhibitor. It is designed to exhibit low nanomolar potency for suppressing RAS
pathway signaling and growth of RAS G12D-bearing cancer cells and is engineered to covalently inactivate RAS G12D irreversibly.
A monotherapy dose-escalation Phase 1/1b trial of RMC-9805, which we refer to as the RMC-9805-001 study, is ongoing.
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On January 9, 2024, we reported that, based on our observations of interim data from the RMC-9805-001 study, RMC-9805 demonstrated oral
bioavailability in patients, exhibiting pharmacokinetics consistent with expectations from preclinical data. We also reported that the compound had cleared
several dose levels and that we observed favorable tolerability results with no dose-limiting toxicities reported, and that a recommended Phase 2 dose and
schedule was not yet reached.
We currently expect to disclose initial clinical PK, safety, tolerability and activity data from the RMC-9805-001 study in the second half of 2024.
Additional RAS(ON) Inhibitors
Beyond this first wave of RAS(ON) Inhibitors, we have other RAS(ON) Inhibitor compounds currently in our research and development pipeline,
including the development candidates RMC-5127 (G12V), RMC-0708 (Q61H) and RMC-8839 (G13C). We are also pursuing pipeline expansion programs
focused on G12R and other targets.
RAS Companion Inhibitors
RMC-4630
Our RAS Companion Inhibitor RMC-4630 is designed as a potent and selective inhibitor of SHP2.
Amgen is currently evaluating RMC-4630 in a Phase 1b study in combination with Amgen’s KRAS(OFF) G12C agent sotorasib (LUMAKRAS®) in
Amgen’s CodeBreaK 101c study.
We and Sanofi, our former SHP2 development partner, sponsored several additional studies involving RMC-4630, all of which are being wound down.
The combination of RMC-4630 with an ERK inhibitor in patients with pancreatic cancer is being evaluated as part of an investigator-sponsored study by
the Netherlands Cancer Institute.
We have no immediate plans for further development of RMC-4630, but we believe this compound remains an option for potential evaluation in
combination regimens.
RMC-5552
Our RAS Companion Inhibitor RMC-5552 is designed as a selective inhibitor of mTORC1 signaling in tumors. We are evaluating RMC-5552 as a
monotherapy in a Phase 1 study, which we refer to as the RMC-5552-001 study, and we may evaluate RMC-5552 in combination with RAS(ON) Inhibitors
for patients with cancers harboring a RAS mutation and co-occurring mutations in the mTOR signaling pathway.
We reported additional interim data from the ongoing dose-escalation portion of the RMC-5552-001 study in October 2023.
We are supplying RMC-5552 to the Regents of the University of California on behalf of its San Francisco campus (UCSF) for an investigator-initiated
Phase 1/1b trial by UCSF of RMC-5552 in patients with recurrent glioblastoma.
RMC-5845
Our RAS Companion Inhibitor RMC-5845 targets SOS1, a protein that plays a key role in converting RAS(OFF) to RAS(ON) in cells. RMC-5845 is
intended for select combination therapies for certain genetically defined tumors. This compound is ready for preparation of an IND application based on
our preclinical development. We have no plans for further development of RMC-5845 at this time based on our current understanding that it may not offer
an advantage over RMC-6236.
Our strategy
Our goal is to develop and commercialize novel targeted therapies to outsmart RAS-addicted cancers for the benefit of patients. RAS proteins drive 30% of
human cancers (Prior et al., Cancer Research 2020), and are largely unserved by targeted therapeutics. The KRAS G12C mutation has been clinically
validated as a therapeutic target, and the evidence is strong that numerous other oncogenic mutations in the RAS family of proteins are likewise compelling
cancer targets. Our collection of RAS(ON) Inhibitors is tailored to target RAS mutations that together comprise the vast majority of RAS-addicted cancers.
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Our RAS(ON) Inhibitors are unique in that they are the first RAS inhibitors in clinical development to specifically target the activated, or ON, form of
oncogenic RAS proteins. This differentiated mechanism of action offers potential improvements over that of the first RAS inhibitors to gain U.S. Food and
Drug Administration (FDA) approval (KRAS G12C inhibitors sotorasib and adagrasib), which interact exclusively with the OFF form and confer relatively
short clinical benefit. Based on an emerging understanding of the limitations of these drugs in the clinic and findings from our own preclinical research, we
believe our RAS(ON) Inhibitors have the potential to deliver deeper antitumor activity and more durable clinical benefit to a broader patient population.
Our pipeline of RAS(ON) multi-selective and RAS(ON) mutant-selective inhibitors offer an opportunity for RAS(ON) doublet combinations designed to
potentially maximize durable clinical benefit. The consistent finding from the first RAS inhibitors is that the main resistance mechanism that curtails
durable efficacy is reactivation of RAS pathway, highlighting the oncogenic addiction in RAS-mutated cancers. The pairing of the RAS(ON) multi-
selective inhibitor RMC-6236 with a mutant-selective inhibitor (such as RMC-6291 or RMC-9805) may address potential resistances which may ultimately
translate to more durable clinical benefit. These doublets form a core part of our strategy to improve the standard of care for patients with RAS-addicted
cancers, along with monotherapy and combination with standard of care therapies. This approach is based on our biological understanding of RAS
addiction and leverages the unique nature of our pipeline.
Our current corporate priorities are to:
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Propel RMC-6236 into Phase 3 pivotal studies. We are currently planning two monotherapy registration studies – one in second line NSCLC
and one in second line PDAC, subject to regulatory input and further analysis of data from the RMC-6236-001 study.
Expand the reach of RMC-6236 potentially into additional lines of therapy, tumor types and mutations. We are evaluating a broader
potential reach of RMC-6236 monotherapy in patients with tumor types beyond NSCLC and PDAC, and genotypes beyond KRAS G12X. In
parallel, we are evaluating RMC-6236 in a series of combination regimens, including combination with a checkpoint inhibitor and
combination with RMC-6291 in the context of a RAS(ON) Inhibitor doublet, and planning is underway for one or more combination clinical
trials for RMC-6236 with standard of care therapies.
Qualify mutant-selective inhibitors led by RMC-6291 and RMC-9805 for late-stage development. We are continuing to evaluate the
monotherapy profile of RMC-6291, focusing on dose optimization towards identification of a recommended Phase 2 dose. In parallel, as
described above, we are evaluating the combination of RMC-6291 with RMC-6236, as well as the combination of RMC-6291 with a
checkpoint inhibitor. We are also continuing to evaluate RMC-9805 clinically, focusing initially on the ongoing dose escalation.
Our opportunity: multiple large unmet needs in RAS-addicted cancers
RAS mutant epidemiology in the United States.
Variants in RAS proteins account for approximately 30% of all human cancers in the United States, many of which are fatal. Diverse oncogenic RAS
variants in three different RAS isoforms (KRAS, NRAS and HRAS) drive distinct human cancers. Figure 1 below summarizes the breakdown, based on
tumor genetics, of the estimated 213,000 new RAS-mutant cancer diagnoses each year in the U.S. Based on these data, we believe there are more than
200,000 new cancers diagnosed annually that could potentially be addressed by RAS inhibitors in the U.S. alone.
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Figure 1. Breakdown of estimated 213,000 new RAS mutant cancer patients per year in the U.S.(1)
(1)
All RAS cancer epidemiology statistics are estimated using tumor mutation frequencies from Foundation Medicine Insights March 2022 and scaled
to estimated patient numbers using cancer incidence from ACS Cancer Facts and Figures 2023:
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b.
RAS mutations include: KRAS G12(A,C,D,F,L,R,S,V), KRAS G13(C,D,R,V), KRAS Q61(E,H,K,L,P,R) NRAS G12(A,C,D,R,S,V), NRAS
G13(C,D,R,V), NRAS Q61(H,K,L,R), HRAS G12(C,D,S,V), HRAS G13(C,D,N,R,S,V), and HRAS Q61(K,L,R).
Includes 13 major solid cancer types: NSCLC, CRC, PDAC, renal, esophageal, head and neck squamous cell, ovarian, stomach, biliary, and
carcinomas of unknown primary (CUP), and advanced melanoma, bladder and endometrial cancers causing mortality.
Our innovation engine
We have built an innovation engine that enables us to discover and develop novel targeted therapies for elusive high-value frontier cancer targets with
particular focus on a cohesive set of disease targets within notorious growth and survival pathways. This engine is centered around our proprietary tri-
complex platform and is bolstered by three complementary pillars:
•
•
•
Deep chemical biology and cancer pharmacology know-how, including assays and proprietary tool compounds, to define the critical
vulnerabilities of “frontier” RAS and related pathway targets, associated signaling circuits in cancer cells and immune system targets;
Sophisticated structure-based drug discovery capabilities, including proven access to complex chemical space, to create drug candidates
tailored to unconventional binding sites on elusive cancer targets; and
Astute precision medicine approach, embracing patient selection and innovative single agent and combination drug regimens, to translate our
preclinical insights into clinical benefit for patients with RAS-addicted cancers.
Our Tri-complex platform
Our proprietary tri-complex technology enables us to discover small molecule inhibitors of targets lacking intrinsic drug binding sites by inducing new
druggable pockets. This occurs through small molecule-driven formation of a high affinity ternary complex (tri-complex) between the target protein, the
small molecule, and a widely expressed cytosolic protein called a chaperone (e.g., cyclophilin A or FKPB12). This platform technology is the foundation of
our RAS(ON) Inhibitor programs. In this context, the inhibitory effect of tri-complex formation on the RAS(ON) target is mediated by steric occlusion of
the site where RAS(ON) binds its downstream effector molecules, such as RAF, which are required for propagating the oncogenic signal. Thus, tri-complex
formation with RAS(ON) targets disrupts RAS effector binding and terminates oncogenic signaling. Our RAS(ON) tri-complex inhibitors, which are
inspired by natural products, are “Beyond Rule of 5” compounds.
8
Pipeline
Our pipeline is summarized below:
RAS(ON) Inhibitors
Overview
Our RAS(ON) Inhibitors are based on our proprietary tri-complex technology platform, which enables a highly differentiated approach to inhibiting the
active, GTP-bound form of RAS (RAS(ON)). We are developing a portfolio of compounds that we believe are the first and only RAS(ON) Inhibitors to use
this mechanism of action. Our portfolio of RAS(ON) Inhibitors includes three compounds that we consider as the first wave of RAS(ON) Inhibitors that we
are advancing: RMC-6236 (multi), RMC-6291 (G12C) and RMC-9805 (G12D). Beyond this first wave of RAS(ON) Inhibitors, we have other RAS(ON)
Inhibitor compounds currently in our research and development pipeline, including our development candidates RMC-5127 (G12V), RMC-0708 (Q61H)
and RMC-8839 (G13C).
We believe that direct inhibitors of RAS(ON) suppress cell growth and survival and are less susceptible to adaptive resistance mechanisms recognized for
RAS(OFF) inhibitors. We are evaluating our RAS(ON) Inhibitors alone and in combination with other drugs and investigational drug candidates,
particularly in-pathway agents. We believe tailored RAS(ON) Inhibitors will be useful to serve the diverse landscape of RAS-driven cancers optimally. We
believe that in some cases, patients may experience maximal clinical benefit from the broad activity of our RAS(ON) multi-selective inhibitor, RMC-6236,
if approved. In others, we believe treatment with a RAS(ON) mutant-selective inhibitor may be optimal. We further believe that in some cases, it could be
beneficial to combine RMC-6236 with a RAS(ON) mutant-selective inhibitor, with RMC-6236 functioning as the backbone of these RAS(ON) Inhibitor
doublets. In addition, we believe that in some cases, combination of our RAS(ON) Inhibitors with standard of care therapies, including immunotherapies,
may be optimal.
RMC-6236
RMC-6236, our RAS (ON) multi-selective inhibitor, is designed as a potent, oral, RAS-selective tri-complex inhibitor of multiple RAS(ON) variants
including cancer drivers at all three of the major mutation hotspot positions, G12, G13, and Q61. RMC-6236 inhibits all three major RAS isoforms,
suppressing the mutant cancer driver and cooperating wild-type RAS proteins.
RMC-6236 is being evaluated in an ongoing monotherapy dose-escalation Phase 1/1b clinical study in patients with KRAS G12-mutated tumors, focused
on NSCLC, PDAC and CRC, which we refer to as the RMC-6236-001 study.
On October 13, 2023, we reported updated interim safety, PK and ctDNA data from the RMC- 6236-001 study. In this study, 131 patients treated across
nine dose cohorts ranging from 10 mg daily to 400 mg daily were evaluable for safety and tolerability as of a data cut-off date of September 11, 2023. The
most common G12 mutations in patients enrolled included: G12D (51%); G12V (28%); G12R (11%); G12A (6%); and G12S (4%). Patients with KRAS
G12C mutations were excluded from the study due to the availability of approved KRAS(OFF) G12C inhibitors. Of the 131 patients, 69 had PDAC, 47 had
NSCLC, 10 had CRC and five had other tumor
9
types. All of these patients had been previously treated with standard of care and/or other regimens, with an overall median of two prior lines of therapy
(with a range of one to seven prior lines of therapy).
As of the September 11, 2023 data cut-off date, we observed that RMC-6236 was generally well tolerated across dose levels in patients with solid tumors
(Table 6236.1). Median duration of treatment was 2.27 months (range: 0.2–14). The most common treatment-related adverse events (TRAEs) were rash
and gastrointestinal (GI)-related toxicities that were primarily Grade 1 or 2 in severity. One previously reported Grade 4 TRAE occurred in a patient with
PDAC treated at 80 mg who had a large intestine perforation at the site of an invasive tumor that reduced in size while on treatment, which resulted in
treatment discontinuation. No fatal TRAEs were observed. Two patients discontinued study treatment due to death: one patient with PDAC (120 mg) died
due to progressive disease; one patient with NSCLC (200 mg) died due to an unknown cause reported as unrelated to RMC-6236. No safety signals were
observed that indicated an elevated risk of hepatotoxicity, which has been reported for some KRAS(OFF) G12C inhibitors.
Table 6236.1. RMC-6236-001: Select treatment-related adverse events.
Total (N=131)
Maximum severity of treatment-related AEs (TRAEs)
TRAEs occurring in ≥10% of patients, n (%)
*
Rash
Nausea
Diarrhea
Vomiting
Stomatitis
Fatigue
Other select TRAEs, n (%)
ALT elevation
AST elevation
Electrocardiogram QT prolonged
TRAEs leading to dose reduction , n (%)
TRAEs leading to treatment discontinuation, n (%)
†
Grade 1
Grade 2
Grade 3
Grade 4
Any Grade
57 (44)
41 (31)
32 (24)
27 (21)
10 (8)
12 (9)
29 (22)
14 (11)
9 (7)
9 (7)
9 (7)
4 (3)
6 (5)
6 (5)
1 (1)
—
—
1 (1)
—
—
9 (7)
—
6 (5)
—
1 (1)
—
2 (2)
—
‡
1 (1)
‡
1 (1)
—
2 (2)
—
—
—
—
—
—
—
—
—
—
—
1 (1)
92 (70)
55 (42)
42 (32)
36 (28)
21 (16)
16 (12)
8 (6)
7 (5)
1 (1)
11 (8)
1 (1)
AE, adverse event; ALT, alanine transaminase; AST, aspartate transferase; PD, progressive disease; TRAEs, treatment-related adverse events.
‡ Post-data extraction, the Grade 3 ALT and AST elevations were associated with biliary obstruction and reported as unrelated to RMC-6236.
* Includes preferred terms of dermatitis acneiform, rash maculopapular, rash, rash pustular, dermatitis psoriasiform, erythema and rash erythematous.
† The most common TRAE leading to dose reduction was rash (acneiform or maculopapular); there were no reductions at doses ≤80 mg.
As of the September 11, 2023 data cut-off date, we observed that RMC-6236 demonstrated dose-dependent increases in exposure at a steady state with
minimal accumulation after repeated daily oral dosing, which we believe is compatible with once-daily dosing. Clinical exposures achieved at once daily
dose levels of 80 mg and above were comparable to those that induced tumor regressions in preclinical xenograft models with KRAS G12X mutations.
ctDNA was assessed in 27 patients with detectable baseline plasma KRAS G12X alleles and evaluable for changes in KRAS variant allele frequency (VAF)
on-treatment. Molecular responses were observed across two tumor types (NSCLC and PDAC) and four different KRAS mutations (KRAS G12D, KRAS
G12V, KRAS G12R and KRAS G12A) with reductions in KRAS VAF consistent with anti-tumor activity. Three clinical case reports illustrated tumor
regressions induced by RMC-6236 in patients with ovarian cancer (KRAS G12V), NSCLC (KRAS G12D) or PDAC (KRAS G12D).
On October 22, 2023, we reported updated interim safety and anti-tumor activity data for dose levels of 80 mg daily and above from the RMC-6236-001
study. In this study, a total of 111 patients with either NSCLC (n=46) or PDAC (n=65) treated across six dose cohorts ranging from 80 mg daily to 400 mg
daily were evaluated for safety and tolerability as of a data cut-off date of October 12, 2023. Patients at dose levels below 80 mg daily were not included in
this analysis based on our preclinical and PK predictions that these dose levels would not be associated with tumor regressions in patients and our clinical
observations of these doses. Common RAS mutations in patients evaluated included G12D, G12V, G12R, G12A and G12S. As noted above, patients with
KRAS G12C mutations were excluded from the study due to the availability of currently approved KRAS(OFF) G12C inhibitors. All of these patients had
previously been treated with standard of care appropriate for tumor type and stage. Patients with NSCLC had received a median of two prior lines of
therapy (range: 1–6), and patients with PDAC had received a median of three prior lines of therapy (range: 1–7).
10
As of the October 12, 2023 data cut-off date, we observed that RMC-6236 was generally well tolerated across the dose levels analyzed (Table 6236.2).
Median duration of treatment was 2.1 months (range: 0.2–10.9). The most common TRAEs were rash and GI-related toxicities that were primarily Grade 1
or 2 in severity. One previously reported Grade 4 TRAE occurred in a patient with PDAC at the 80 mg dose level who had a large intestine perforation at
the site of an invasive tumor that reduced in size while on treatment, which resulted in treatment discontinuation. No fatal TRAEs were observed. No safety
signals were observed that indicated an elevated risk of hepatotoxicity, which has been reported for some KRAS(OFF) G12C inhibitors.
Table 6236.2. RMC-6236-001: Select treatment-related adverse events for patients with NSCLC and PDAC Treated at ≥80 mg daily
Total (N=111)
Maximum Severity of Treatment-Related AEs (TRAEs)
TRAEs occurring in ≥10% of patients, n (%)
‡
Rash
Nausea
Diarrhea
Vomiting
Stomatitis
Fatigue
Other select TRAEs, n (%)
ALT elevation
Maximum Severity of Treatment-Related AEs (TRAEs)
AST elevation
Electrocardiogram QT prolonged
TRAEs leading to dose reduction*, n (%)
TRAEs leading to treatment discontinuation, n (%)
Grade 1
Grade 2
Grade 3
Grade 4
Any Grade
58(52)
40(36)
28(25)
30(27)
13(12)
11(10)
25(23)
11(10)
14(13)
7(6)
9(8)
6(5)
7(6)
—
1(1)
—
2(2)
—
—
—
—
—
—
—
90(81)
51(46)
43(39)
37(33)
24(22)
17(15)
8(7)
1(1)
—
—
9(8)
Grade 1
Grade 2
Grade 3
Grade 4
Any Grade
8(7)
1(1)
—
—
—
—
10(9)
—
—
—
†
5(5)
—
—
—
—
^
1(1)
8(7)
1(1)
15(14)
1(1)
AE, adverse event; ALT, alanine transaminase; AST, aspartate transferase; TRAEs, treatment-related adverse events.
‡ Includes preferred terms of dermatitis acneiform, rash maculopapular, rash, rash pustular, erythema, rash erythematous; multiple types of rash may have
occurred in the same patient.
* The most common reason for dose reduction was rash.
† Grade 3 TRAEs leading to reduction were rash (n=4), including one patient with a dose reduction due to rash and decreased appetite, and stomatitis
(n=1).
^ One Grade 4 TRAE occurred in a patient with PDAC at the 80 mg dose level who had a large intestine perforation at the site of an invasive tumor that
reduced in size while on treatment.
Clinical activity was evaluated as of the October 12, 2023 data cut-off date in patients with NSCLC (n=40) and PDAC (n=46) who had received the first
dose of RMC-6236 at least eight weeks prior to such date (n=86). Confirmed objective responses included tumors harboring KRAS mutations G12D,
G12V or G12R, and disease control was observed in patients across all KRAS mutations, including G12A and G12S.
As of the October 12, 2023 data cut-off date, RMC-6236 demonstrated preliminary evidence of clinical activity in efficacy-evaluable NSCLC patients
(Figure 6236.1).
11
Figure 6236.1. RMC-6236-001: Change in tumor burden from efficacy-evaluable KRAS G12X NSCLC patients.
QD, daily dosing; PD, progressive disease; SD, stable disease; PR, partial response; PR*, unconfirmed PR per Response Evaluation Criteria in Solid
Tumors (RECIST) 1.1; CR, complete response.
‡ Patients who received first dose of RMC-6236 at least eight weeks prior to data extract date.
Among the efficacy-evaluable NSCLC patients, the ORR was 38 percent, with one patient achieving a complete response (CR) as a best response and 14
patients achieving a partial response (PR) (including three unconfirmed PRs) (Table 6236.3). The DCR in this NSCLC population was 85 percent.
Table 6236.3. RMC-6236-001: Tumor Response per RECIST for efficacy-evaluable KRAS G12X NSCLC patients
Data extracted October 12, 2023.
Tumor Response (per RECIST 1.1)
Best Overall Response, n (%)
CR
PR
SD
PD
†
NE
ORR, n (%)
Confirmed, n
DCR (CR+PR+SD), n (%)
1(3)
14(35)
19(48)
5(13)
1(3)
15(38)
12
34(85)
CR, complete response; PR, partial response; SD, stable disease; PD, progressive disease; NE, not evaluable; ORR, objective response rate; DCR, disease
control rate.
† One subject withdrew from study without post-baseline scans.
As of the October 12, 2023 data cut-off date, RMC-6236 demonstrated preliminary evidence of clinical activity in efficacy-evaluable PDAC patients
(Figure 6236.2).
12
Figure 6236.2. RMC-6236-001: Change in tumor burden from efficacy-evaluable KRAS G12X PDAC patients
QD, daily dosing; PD, progressive disease; SD, stable disease; PR, partial response; PR*, unconfirmed PR per RECIST 1.1.
‡ Patients who received first dose of RMC-6236 at least eight weeks prior to data extract date.
Among the efficacy-evaluable PDAC patients, the ORR was 20 percent, with nine patients achieving a PR (including four unconfirmed PRs) as a best
response (Table 6236.4). The DCR in this PDAC population was 87 percent.
Table 6236.4. RMC-6236-001: Tumor Response per RECIST for efficacy-evaluable KRAS G12X PDAC patients
Data extracted October 12, 2023.
Tumor Response (per RECIST 1.1)
Best Overall Response, n (%)
PR
SD
PD
†
NE
ORR, n (%)
Confirmed, n
DCR (CR+PR+SD), n (%)
9(20)
31(67)
3(7)
3(7)
9(20)
5
40(87)
PR, partial response; SD, stable disease; PD, progressive disease; NE, not evaluable; ORR, objective response rate; DCR, disease control rate.
† Two patients died prior to first post-baseline scan; one patient had scan after 11 days of treatment and subsequently died due to PD.
On January 9, 2024, we reported that, with additional follow-up after the October 2023 reports described above, the profile of RMC-6236 remained
relatively consistent with the description in those reports. We also reported that the ORR among efficacy-evaluable NSCLC patients was in the low- to mid-
40 percent range, that the ORR for NSCLC patients in the 300 mg dose cohort was higher than the mid-40 percent range and that the DCR was in the high-
80 percent range. We likewise reported that the ORR among efficacy-evaluable PDAC patients was in the mid-20 percent range, that the ORR for PDAC
patients in the 300 mg dose cohort was higher than the mid-20 percent range and that the DCR was in the high-80 percent range. Based on these
observations, we reported that the 300 mg daily dose appeared attractive for safety and antitumor activity in both NSCLC and PDAC settings.
RMC-6291
RMC-6291 is designed as a RAS(ON) oral G12C-selective inhibitor. It is designed to exhibit subnanomolar potency for suppressing RAS pathway
signaling and growth of RAS G12C-bearing cancer cells and is engineered to be highly selective for RAS G12C over wild-type RAS and other cellular
targets. RMC-6291 is designed to be differentiated from first-generation KRAS(OFF) G12C inhibitors, which sequester the KRAS(OFF) G12C form, by its
potential mechanism of directly inhibiting the RAS(ON) G12C form. We believe direct inhibition of the ON form offers important biological advantages,
including more rapid termination of RAS signaling and more robust inhibition in the face of known resistance mechanisms.
13
A monotherapy dose-escalation Phase 1b study of RMC-6291, which we refer to as the RMC 6291-001 study, is ongoing. On October 13, 2023, we
reported interim preliminary safety and anti-tumor data from the RMC-6291-001 study. In this study, 63 patients treated across seven dose cohorts ranging
from 50 mg daily to 400 mg twice daily were evaluable for initial safety and tolerability as of a data cut-off date of October 5, 2023. Of these patients, 23
had NSCLC, 33 had CRC and seven had other tumor types. All of these patients had previously been treated with standard of care therapy, with an overall
median of three prior lines of therapy (with a range of one to seven prior lines of therapy).
As of the October 5, 2023 data cut-off date, we observed that RMC-6291 demonstrated a profile that was generally well tolerated across dose levels (Table
6291.1). Tolerability was generally consistent across tumor types. The most common TRAEs were QTc prolongation and GI-related toxicities that were
primarily Grade 1 or 2 in severity. All QTc prolongations were asymptomatic with no cardiac sequalae reported. No treatment-related Grade 4 or 5 AEs or
serious AEs (SAEs) were reported. No safety signals were observed that suggest an increased risk of hepatotoxicity, which has been reported for some
KRAS G12C(OFF) inhibitors.
Table 6291.1. RMC-6291-001: Select treatment-related adverse events
Total (N=63)
Maximum Severity of Treatment-Related AEs (TRAEs)
TRAEs occurring in ≥10% of patients, n (%)
Diarrhea
Nausea
ECG QT prolonged
QTcF* ≥ 501 ms
Fatigue
Vomiting
AST increased
TRAEs leading to dose reduction, n (%)
TRAEs leading to treatment discontinuation, n (%)
Grade 1
Grade 2
Grade 3
Any Grade
10 (16)
14 (22)
8 (13)
—
4 (6)
6 (10)
7 (11)
—
—
7 (11)
3 (5)
1 (2)
—
4 (6)
2 (3)
—
1 (2)
—
1 (2)
—
7 (11)
1 (2)
—
—
—
8 (13)
1 (2)
18 (29)
17 (27)
16 (25)
—
8 (13)
8 (13)
7 (11)
9 (14)
1 (2)
*QTcF refers to QT interval corrected for heart rate by Fridericia's formula.
As of the October 5, 2023 data cut-off date, we observed that RMC-6291 demonstrated oral bioavailability and demonstrated dose-dependent plasma
pharmacokinetics. Reduction in ctDNA of the KRAS G12C allele across doses correlated with clinical response.
As of the October 5, 2023 data cut-off date, RMC-6291 demonstrated preliminary evidence of clinical activity in patients with KRAS G12C-mutant
NSCLC previously treated with or naïve to a KRAS(OFF) G12C inhibitor (Figure 6291.1).
14
Figure 6291.1. RMC-6291-001: Change in tumor burden from efficacy-evaluable patients with NSCLC previously treated with or naïve to a KRAS(OFF)
G12C inhibitor
Evaluable for Efficacy* (N=17)
CR, complete response; PR, confirmed partial response; PRu, unconfirmed partial response; SD, stable disease; ORR, objective response rate; DCR,
disease control rate
* All treated patients who received a first dose of RMC-6291 at least eight weeks prior to the data extract date.
Tumor response per RECIST 1.1 for the patients reflected in Figure 6291.1 is summarized below (Table 6291.2).
Table 6291.2. RMC-6291-001: Tumor Response per RECIST 1.1 for efficacy-evaluable patients with NSCLC previously treated with or naïve to a
KRAS(OFF) G12C inhibitor
Data Extracted October 5, 2023.
Tumor Response (per RECIST 1.1)
Best Overall Response, n (%)
†
Partial response
Stable disease
Progressive disease
ORR, n (%)
DCR (CR+PR+SD), n (%)
Prior G12Ci (n=10)
Naïve to G12Ci (n=7)
5 (50)
5 (50)
—
5 (50)
10 (100)
3 (43)
4 (57)
—
3 (43)
7 (100)
† Partial response includes five confirmed and three unconfirmed.
RECIST, Response evaluation criteria in solid tumors.
As of the October 5, 2023 data cut-off date, RMC-6291 also demonstrated preliminary evidence of clinical activity in patients with KRAS G12C-mutant
CRC who were naïve to treatment with a KRAS(OFF) G12C inhibitor (Figure 6291.2).
15
Figure 6291.2. RMC-6291-001: Change in tumor burden from efficacy-evaluable patients with CRC who were naïve to treatment with a KRAS(OFF) G12C
inhibitor
Evaluable for Efficacy* (N=19)
* All treated patients who received first dose of RMC-6291 at least eight weeks prior to the data extract date.
Tumor response per RECIST 1.1 for the patients reflected in Figure 6291.2 is summarized below (Table 6291.3).
Table 6291.3. RMC-6291-001: Tumor Response per RECIST for efficacy-evaluable patients with CRC that were naïve to treatment with a KRAS(OFF)
G12C inhibitor
Data Extracted October 5, 2023.
Tumor Response (per RECIST 1.1)
Best Overall Response, n (%)
†
Partial response
Stable disease
Progressive disease
ORR, n (%)
DCR (CR+PR+SD), n (%)
‡
N=20
8 (40)
8 (40)
4 (20)
8 (40)
16 (80)
† Partial response includes five confirmed and three unconfirmed.
‡ One patient had progressive disease due to a new lesion; target lesion measurements were not available.
On January 9, 2024, we reported that, relative to the October 13, 2023 report, the profile of RMC-6291 in the RMC-6291-001 study remained relatively
stable. We continue to dose patients at a 200 mg BID.
RMC-9805
RMC-9805 is designed as a RAS(ON) oral G12D-selective inhibitor. It is designed to exhibit low nanomolar potency for suppressing RAS pathway
signaling and growth of RAS G12D-bearing cancer cells and is engineered to covalently inactivate RAS G12D for irreversible inhibition. To our
knowledge, RMC-9805 is the first drug candidate that covalently modified an aspartic acid residue in preclinical studies.
16
In a series of in vivo tumor xenograft studies, RMC-9805 was highly active against NSCLC, PDAC and CRC models bearing the KRAS G12D driver
mutation (Figure 9805.1). Across cancer types, RMC-9805 drove deep tumor regressions, including complete responses, and established preclinical
response rates, which we believe supported advancement into clinical development.
Figure 9805.1. RMC-9805 was highly active in vivo across KRAS G12D cancer models.
In vivo characterization of the effect of RMC-9805 on the growth of KRAS G12D cancers. RMC-9805 was dosed at 100 mg/kg po qd. N=2-8/group.
NSCLC = non-small cell lung cancer; PDAC = pancreatic ductal adenocarcinoma; CRC = colorectal cancer. Responses assigned according to mRECIST =
modified RECIST (modified from Gao et al. Nat Med. 2015). ORR = objective response rate; DCR = disease control rate. RVMD preclinical research as of
11/02/22.
A monotherapy dose-escalation Phase 1/1b trial of RMC-9805, which we refer to as the RMC-9805-001 study, is ongoing.
On January 9, 2024, we reported that, based on our observations of data from the RMC-9805-001 study, RMC-9805 demonstrated oral bioavailability in
patients, exhibiting PK consistent with expectations from preclinical data. We also reported that the compound has cleared several dose levels and that we
observed favorable tolerability results with no dose-limiting toxicities reported and that a recommended Phase 2 dose and schedule was not yet reached.
RMC-5127
RMC-5127 is designed as a RAS(ON) oral G12V-selective inhibitor. It is designed to exhibit picomolar potency for suppressing RAS pathway signaling
and growth of RAS G12V-bearing cancer cells and is engineered for selective inhibition of RAS G12V over other RAS isoforms via non-covalent binding
interactions. RMC-5127 is in the Investigational New Drug application (IND)-enabling stage of preclinical development.
RMC-0708
RMC-0708 is designed as a RAS(ON) oral Q61H-selective inhibitor. It is designed to exhibit picomolar potency for suppressing RAS pathway signaling
and growth of RAS Q61H-bearing cancer cells and is engineered for selective inhibition of RAS Q61H over other RAS isoforms via non-covalent binding
interactions.
RMC-8839
RMC-8839 is designed as a RAS(ON) oral G13C-selective inhibitor. It is designed to exhibit picomolar potency for suppressing RAS pathway signaling
and growth of KRAS G13C-bearing cancer cells and is engineered to covalently inactivate KRAS G13C for irreversible inhibition. We believe RMC-8839
is ready for preparation of an IND based on our preclinical development, but we have deferred active development of this compound.
17
RAS Companion Inhibitors
Overview
Our RAS Companion Inhibitors are designed to suppress cooperating targets and pathways that sustain RAS-addicted cancers.
RMC-4630
Our RAS Companion Inhibitor RMC-4630 is designed as a potent and selective inhibitor of SHP2, a central node in the RAS signaling pathway.
Amgen is currently evaluating RMC-4630 in a Phase 1b study in combination with Amgen’s KRAS(OFF) G12C agent sotorasib (LUMAKRAS®) in
Amgen’s CodeBreaK 101c study.
We and Sanofi, our former SHP2 development partner, sponsored several additional studies involving RMC-4630, all of which are being wound down.
The combination of RMC-4630 with an ERK inhibitor in patients with pancreatic cancer is being evaluated as part of an investigator-sponsored study by
the Netherlands Cancer Institute.
We have no immediate plans for further development of RMC-4630, but we believe this compound remains an option for potential evaluation in
combination regimens.
RMC-5552
Our RAS Companion Inhibitor RMC-5552 is designed as a selective inhibitor of hyperactivated mTORC1 signaling in tumors. We are evaluating RMC-
5552 as a monotherapy in a Phase 1 study, which we refer to as the RMC-5552-001 study, and we may evaluate RMC-5552 in combination with RAS
inhibitors for patients with cancers harboring a RAS mutation and co-occurring mutations in the mTOR signaling pathway.
mTORC1 is a critical regulator of metabolism, growth and proliferation within cells, including cancer cells. The abnormal activation of mTORC1, and
subsequent inactivation of the tumor suppressor 4EBP1, is a mechanism that is frequently harnessed by cancer cells to gain a growth and proliferation
advantage over normal cells. RMC-5552 is designed to selectively and deeply inhibit mTORC1, thereby preventing phosphorylation and inactivation of
4EBP1, a downstream protein in the mTOR signaling pathway that normally suppresses expression of certain oncogenes such as C-MYC. RMC-5552 has
been shown to have combinatorial activity with KRAS G12C inhibitors in preclinical models of KRAS G12C lung and colon cancer, supporting the role of
RMC-5552 in our portfolio of RAS Companion Inhibitors.
We reported additional interim data from the ongoing dose-escalation portion of the RMC-5552-001 study in October 2023 as of a September 4, 2023 data
cut-off date. These data further support our previous observations that RMC-5552 was acceptably tolerated at doses that have demonstrated meaningful
anti-tumor activity in clinical studies, while largely avoiding well-described toxicities associated with mTORC2 inhibition, such as hyperglycemia. Dose
optimization is ongoing in the RMC-5552-01 study.
Figure 5552.1 below summarizes the best percent change in tumor burden from baseline for efficacy evaluable subjects treated with RMC-5552 at ≥6 mg
as of the September 4, 2023 data cut-off date.
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Figure 5552.1. Best Percent Change in Tumor Burden from Baseline in Efficacy Evaluable Subjects Treated at ≥6 mg.
We are supplying RMC-5552 to the Regents of the University of California on behalf of its San Francisco campus (UCSF) for an investigator-initiated
Phase 1/1b trial by UCSF of RMC-5552 in patients with recurrent glioblastoma.
RMC-5845
RMC-5845 targets SOS1, a protein that plays a key role in converting RAS(OFF) to RAS(ON) in cells. RMC-5845 is intended for select combination
therapies for certain genetically defined tumors. This compound is ready for preparation of an IND based on our preclinical development. We have no plans
for further development of RMC-5845 at this time based on our current understanding that it may not offer an advantage over RMC-6236.
Commercial plan
We intend to retain significant development and commercialization rights to our product candidates and, if marketing approval is obtained, to
commercialize our product candidates on our own, or potentially with a partner, in the United States and other regions. We currently have limited sales,
marketing and commercial product distribution capabilities. We intend to build the necessary infrastructure and capabilities over time for the United States,
and potentially other regions, in connection with the advancement of our product candidates. Clinical data, the size of the addressable patient population,
the size of the commercial infrastructure and manufacturing needs, the status of our pipeline and other factors, may all influence or alter our
commercialization plans.
Manufacturing
We rely on and will continue to rely on contract manufacturing organizations (CMOs) for both drug substance and drug product. Currently, all of our
manufacturing is outsourced to well-established third-party manufacturers. We have entered into contracts with CMOs for production of drug substance and
drug product for our clinical trials and IND-enabling development studies, and plan to enter into additional contracts with these or other manufacturers for
additional supply.
Our outsourced approach to manufacturing relies on CMOs to first develop manufacturing processes that are compliant with current Good Manufacturing
Practice ( cGMP), then produce material for preclinical and clinical studies. Our agreements with CMOs may obligate them to develop and qualify
upstream and downstream processes, develop drug product process, validate (and, in some cases, develop) suitable analytical methods for test and release
as well as stability testing, produce drug substance for preclinical testing, produce cGMP-compliant drug substance, or produce cGMP-compliant drug
product. We conduct audits of CMOs prior to initiation of activities under these agreements and monitor operations to ensure compliance with the mutually
agreed process descriptions and to cGMP regulations.
Competition
The biotechnology and pharmaceutical industries, and the oncology sector in particular, are characterized by rapid evolution of technologies, fierce
competition and strong defense of intellectual property rights. While we believe that our discovery programs, technology, knowledge, experience and
scientific resources provide us with competitive advantages, we face competition from major
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pharmaceutical and biotechnology companies, academic institutions, government agencies and public and private research institutions, among others.
Any product candidates that we successfully develop and commercialize will compete with currently approved therapies and new therapies that may
become available in the future. Key product features that would affect our ability to effectively compete with other therapeutics include the efficacy, safety
and convenience of our products and the ease of use and effectiveness of any complementary diagnostics and/or companion diagnostics.
There are a number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies.
These treatments consist of small molecule drug products, biologics, cell-based therapies and traditional chemotherapy. Smaller and other early-stage
companies may also prove to be significant competitors. In addition, academic research departments and public and private research institutions may be
conducting research on compounds that could prove to be competitive.
There are several programs in clinical development targeting KRAS G12C, including programs directed at KRAS(OFF) G12C being conducted by Amgen
Inc., Betta Pharmaceuticals Co., Ltd., Bristol Myers Squibb, Chengdu Huajian Future Technology Co. Ltd., D3 BIO, Inc., Eli Lilly, GenEros Biopharma
Ltd., Genhouse Bio Co. Ltd., Guangzhou BeBetter Medicine Technology Co., Ltd., HUYA Bioscience, Innovent Biologics, Inc. (licensed to GenFleet
Therapeutics), InventisBio, Jacobio Pharmaceuticals Co. Ltd., Jiangsu Hansoh Pharmaceutical Group Co., Ltd., Merck, Sharpe & Dohme LLC, Novartis
AG, Roche, Shanghai Junshi Biosciences Co., Ltd., Shanghai YingLi Pharmaceutical, Shouyao Holdings (Beijing) Co. Ltd., and Suzhou Zelgen
Biopharmaceuticals. BridgeBio Pharma, Inc. has a KRAS(ON) G12C program in the clinic. There are also several clinical programs directed at KRAS
G12D, including those being conducted by Astellas Pharma Inc., Bristol Myers Squibb, Incyte Corporation and Jiangsu Hengrui Pharmaceuticals Company
Ltd. Other clinical programs directed at mutant RAS are being conducted, including those by Alaunos Therapeutics, Inc., Boehringer Ingelheim, Chugai
Pharmaceutical Co., Ltd., Elicio Therapeutics, Gritstone bio, Inc., Moderna, Inc., Quanta Therapeutics, RasCal Therapeutics, Shanghai YingLi
Pharmaceutical, Silenseed Ltd. and Targovax ASA.
The above list includes corporate competitors that we are currently aware of and that are currently conducting clinical trials or marketing in geographies
where we currently anticipate conducting clinical trials for our product candidates. However, companies operating in other geographies and smaller and
other early-stage companies may also prove to be significant competitors. In addition, academic research departments and public and private research
institutions may be conducting research on compounds that could prove to be competitive.
The availability of coverage and reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness
of our products. If and when our products receive FDA approval, they could be subject to maximum fair price (MFP) negotiation and application by the
Centers for Medicare & Medicaid Services (CMS) under terms of the Inflation Reduction Act of 2022 (the IRA), nine years after launch in the United
States. Our competitors also may obtain FDA, or other regulatory approval for their products more rapidly than we may obtain approval for ours, which
could result in our competitors establishing a strong market position before we are able to enter the market.
Many of the companies against which we may compete have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller or early-
stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
Intellectual Property
Our success depends in part on our ability and the ability of our collaborators to obtain and maintain proprietary protection for our technology, programs
and know-how related to our business, defend and enforce our intellectual property rights, in particular, our patent rights, preserve the confidentiality of our
trade secrets, and operate without infringing valid and enforceable intellectual property rights of others. We endeavor to establish, maintain and enforce
intellectual property rights that protect our business interests.
The term of individual patents depends upon the legal term of patents in the countries in which they are obtained. In most countries in which we file,
including the United States, the patent term is generally 20 years from the earliest date of filing a non-provisional patent application, assuming the patent
has not been terminally disclaimed over a commonly owned patent or a patent naming a common inventor, or over a patent not commonly owned but that
was disqualified as prior art as the result of activities undertaken within the scope of a joint research agreement. In the United States, the term of a patent
may also be eligible for patent term adjustment for delays within the United States Patent and Trademark Office (the USPTO). In addition, for patents that
cover an FDA-approved drug, the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act), may permit a patent term
extension of
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up to five years beyond the expiration of the patent. While the length of such patent term extension is related to the length of time the drug is under
regulatory review, patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only
one patent per approved drug may be extended and only those claims covering the approved drug product, a method for using it or a method for
manufacturing it may be extended. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that
covers an approved drug. In the future, if and when our products receive FDA approval, we expect to apply for patent term extensions on patents covering
those products. We plan to seek any available patent term extension to any issued patents we may be granted in any jurisdiction where such extensions are
available; however, there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether
such extensions should be granted, and if granted, the length of such extensions.
We also rely on trade secrets, know-how and confidential information relating to our programs to develop and maintain our proprietary position, and seek
to protect and maintain the confidentiality of such items to protect aspects of our business that are not amenable to, or that we do not currently consider
appropriate for, patent protection. Our trade secrets include, for example, certain program specific syntheses, manufacturing schema, formulations,
biomarkers, patient selection strategies and certain aspects of our proprietary tri-complex technology platform. It is our policy to require our employees,
consultants, contractors, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements prior to the
commencement of employment or consulting relationships with us, and for employees, contractors and consultants to enter into invention assignment
agreements with us. These agreements generally provide that all confidential information developed or made known to the individual during the course of
the individual’s relationship with us is to be kept confidential and not to be disclosed to third parties except in specific circumstances. Where applicable, the
agreements provide that all inventions to which the individual contributed as an inventor shall be assigned to us, and, as such, will become our property.
There can be no assurance, however, that these agreements will be self-executing or otherwise provide meaningful protection or adequate remedies for our
trade secrets or other proprietary information, including in the event of unauthorized use or disclosure of such information. We also seek to preserve the
integrity and confidentiality of our trade secrets and confidential information by maintaining physical security of our premises and physical and electronic
security of our information technology systems. While we have confidence in the measures we take to protect and preserve our trade secrets, such measures
can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be
independently discovered by competitors. For more information regarding the risks related to intellectual property, please see “Risk factors—Risks related
to intellectual property.”
Our Program-Specific Patent Portfolio
Our patent portfolio is directed to small molecules, platform methodologies and related technology. We seek patent protection for product candidates,
development programs and related alternatives by filing and prosecuting patent applications in the United States and other countries, as appropriate.
We own and, in some cases, co-own and exclusively license, patents and patent applications related to our RAS tri-complex inhibitors and related platform
technology. Our patent portfolio related to this program consists of ownership rights to several patent families that include filings covering compositions of
matter or methods of using our development candidates alone or in combination with certain other therapeutic agents, or aspects pertaining to our tri-
complex approach to RAS inhibition. The issued patents, and any patents issuing from these patent applications are expected to expire between 2031 (for
patents originating from the Warp Drive Bio portfolio) and 2043 (for patents originating from Revolution Medicines’ portfolio that did not originate from
Warp Drive Bio), without accounting for potentially available patent term adjustments or extensions.
We own and co-own patents and patent applications related to our SHP2 development program. Our patent portfolio related to this program consists of
several owned or co-owned patent families that include filings relating to compositions of matter or methods of using our development candidate, RMC-
4630, alone or in combination with certain other therapeutic agents. The issued patents, and any patents issuing from these patent applications, are expected
to expire between 2037 and 2043, without accounting for potentially available patent term adjustments or extensions.
We own or exclusively license from the Regents of the University of California on behalf of its San Francisco campus (UCSF) patents and patent
applications related to our mTORC1 development program. Our patent portfolio related to this program consists of several patent families that include
filings covering compositions of matter or methods of using our development candidate, RMC-5552, alone or in combination with certain other therapeutic
agents. The issued patents, and any patents issuing from these patent applications, are expected to expire between 2035 and 2043, without accounting for
potentially available patent term adjustments or extensions.
We also own patent applications related to our SOS1 development program. Our patent portfolio related to this program consists of ownership of several
patent families that include filings relating to compositions of matter or methods of using our development candidate, RMC-5845, alone or in combination
with certain other therapeutic agents. The issued patents, and any patents issuing from these patent applications, are expected to expire between 2040 and
2043, without accounting for potentially available patent term adjustments or extensions.
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Government Regulation
The FDA and other regulatory authorities at federal, state and local levels, as well as in foreign countries, extensively regulate, among other things, the
research, development, testing, manufacture, storage, recordkeeping, approval, labeling, marketing and promotion, distribution, post-approval monitoring
and reporting, sampling, and import and export of products, such as those we are developing. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial
resources.
U.S. Drug Regulation
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (the FDCA) and its implementing regulations. FDA
approval is required before any new drug can be marketed in the United States. Drugs are also subject to other federal, state and local statutes and
regulations. Failure to comply with applicable FDA or other requirements may subject a company to a variety of administrative or judicial sanctions, such
as FDA clinical holds, refusal to approve pending applications, withdrawal of an approval, warning or untitled letters, product recalls, product seizures,
total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.
The process required by the FDA before product candidates may be marketed in the United States generally involves the following:
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completion of extensive preclinical laboratory tests and animal studies, including safety and toxicity studies performed in accordance with
applicable regulations, including the FDA’s Good Laboratory Practice (GLP) regulations;
manufacture of clinical drug supply in accordance with the FDA’s cGMP regulations for use in clinical studies;
submission to the FDA of an IND, which must become effective before human clinical studies may begin and must be updated annually or
when certain changes or updates are made;
approval by an independent institutional review board (IRB) or ethics committee representing each clinical site before a clinical study may be
initiated;
performance of adequate and well-controlled human clinical trials in accordance with good clinical practice (GCP), regulations to establish
the safety and efficacy of the product candidate for each proposed indication;
preparation of and submission to the FDA of a new drug application (NDA) after completion of all pivotal trials;
a determination by the FDA within 60 days of its receipt of an NDA to file the application for review;
satisfactory completion of an FDA advisory committee review, if applicable;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility(ies) where the product is manufactured to assess
compliance with cGMP regulations, and of potential inspection selected clinical investigation sites to assess compliance with GCP;
payment of user fees for FDA review of the NDA; and
FDA review and approval of an NDA to permit commercial marketing of the product for its particular labeled uses in the United States.
Preclinical and Clinical Studies
Preclinical tests include laboratory (in vitro) evaluation of product chemistry, formulation and toxicity, as well as animal (in vivo) studies to assess the
characteristics and potential safety and efficacy of the product candidate. The conduct of certain preclinical tests that provide safety and toxicological
information must comply with certain federal regulations and requirements, including GLP. The results of preclinical testing are submitted to the FDA as
part of an IND along with other information, including information about product chemistry, manufacturing and controls (CMC) and any available human
data or literature to support use of the product in humans. An IND is a request for allowance from the FDA to administer an investigational product to
humans and must become effective before clinical trials may begin. Long-term preclinical tests, such as animal tests of reproductive toxicity and
carcinogenicity, may continue after the IND is submitted.
The central focus of an IND submission is on the general investigational plan and the protocol(s) for human studies. An IND must become effective before
human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises
concerns or questions related to the proposed clinical studies. In such a case, the IND may be placed on clinical hold, and the IND sponsor and the FDA
must resolve any outstanding concerns or questions before clinical studies can begin.
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For each successive clinical trial conducted with the investigational drug, a separate, new protocol submission to an existing IND must be made, along with
any subsequent changes to the investigational plan. Sponsors are also subject to ongoing reporting requirements, including submission of IND safety
reports for any serious adverse experiences associated with use of the investigational drug or findings from preclinical studies suggesting a significant risk
for human subjects, as well as IND annual reports on the progress of the investigations conducted under the IND.
Clinical studies involve the administration of the investigational drug to human subjects under the supervision of qualified investigators in accordance with
GCP, which include among other things, the requirement that all research subjects provide their informed consent for participation in each clinical study.
Clinical studies are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and
the efficacy criteria to be evaluated. A protocol for each clinical study and any subsequent protocol amendments must be submitted to the FDA as part of
the IND. Additionally, approval must also be obtained from each clinical study site’s IRB before a study may be initiated at the site, and the IRB must
monitor the study until completed. Sponsors of clinical trials generally must register and report ongoing clinical studies and clinical study results to public
registries, including the website maintained by the U.S. National Institutes of Health, ClinicalTrials.gov.
Human clinical trials are typically divided into three or four phases. Although the phases are usually conducted sequentially, they may overlap or be
combined.
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Phase 1. The drug is initially introduced into healthy human subjects or into patients with the target disease or condition. These studies are
designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the drug in humans, the side effects associated
with increasing doses, and if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening
diseases, such as cancer, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial
human testing is often conducted in patients.
Phase 2. The drug is administered to a limited patient population to evaluate tolerance and optimal dose, identify possible adverse side
effects and safety risks, and preliminarily evaluate efficacy. Multiple Phase 2 trials may be conducted to obtain additional data prior to
beginning Phase 3 trials.
Phase 3. The drug is administered to an expanded patient population, generally at geographically dispersed clinical study sites to generate
enough data to statistically evaluate dosage, clinical effectiveness and safety, to establish the overall benefit-risk relationship of the
investigational product and to provide an adequate basis for product labeling.
Phase 4. In some cases, the FDA may condition approval of an NDA for a product candidate on the sponsor’s agreement to conduct
additional clinical studies after approval. In other cases, a sponsor may voluntarily conduct additional clinical studies after approval to gain
more information about the drug in the approved indication. Such post-approval studies are typically referred to as Phase 4 clinical studies.
The FDA, the IRB, other regulatory authorities or the clinical study sponsor may suspend or terminate a clinical study at any time on various grounds,
including a finding that the research subjects are being exposed to an unacceptable health risk. The sponsor may also suspend or terminate a clinical study
based on evolving business objectives and/or competitive climate.
Concurrent with clinical trials, companies may complete additional in vivo studies and develop additional information about the characteristics of the
product candidate. Companies must also finalize a process for manufacturing the product in commercially applicable quantities in accordance with cGMP
requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, must use
validated methods for testing the product against specifications to confirm its identity, strength, quality and purity. Additionally, appropriate packaging
must be selected and tested, and stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its
shelf life.
U.S. review and approval process
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of preclinical studies and other
non-clinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls, and proposed labeling,
among other things, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. The
submission of an NDA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies.
An NDA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive
findings, together with detailed information relating to the product’s CMC and proposed labeling, among other things. Data can come from company-
sponsored clinical studies intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies
initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and
effectiveness of the investigational product to the satisfaction of the FDA.
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The FDA reviews all submitted NDAs before it accepts them for filing. The FDA has 60 days from its receipt of an NDA to determine whether the
application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. The FDA
may request additional information rather than accept an application for filing. In this event, the application must be resubmitted with the additional
information and is subject to payment of additional user fees. The resubmitted application is also subject to review before the FDA accepts it for filing.
Once the submission is accepted for filing, the FDA begins an in-depth substantive review. Under applicable performance goals established by the
Prescription Drug User Fee Act (the PDUFA), the FDA endeavors to review applications subject to standard review within ten to twelve months, and to
review applications subject to priority review within six to eight months, depending on whether the drug is a new molecular entity.
The FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee
for review, evaluation and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the
recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an
application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure
consistent production of the product within required specifications. Additionally, the FDA may inspect one or more clinical sites to assure that relevant
study data were obtained in compliance with GCP requirements.
After the FDA evaluates the NDA and conducts any inspections of manufacturing facilities and/or clinical trial sites, it may issue an approval letter or a
complete response letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A
complete response letter indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A
complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information, including
additional clinical trials or other significant and time-consuming requirements related to clinical trials, nonclinical testing or manufacturing in order for the
FDA to reconsider the application. Even with submission of this additional information, the FDA may ultimately decide that an application does not satisfy
the regulatory criteria for approval.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for
which such product may be marketed. For example, as a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy
(REMS) program to help ensure that the benefits of the drug outweigh its risks. If the FDA determines a REMS program is necessary during review of the
application, the drug sponsor must agree to the REMS plan at the time of approval. A REMS program may be required to include various elements, such as
a medication guide or patient package insert, a communication plan to educate healthcare providers of the drug’s risks, or other elements to assure safe use,
such as limitations on who may prescribe or dispense the drug, dispensing only under certain circumstances, special monitoring and the use of patient
registries. In addition, all REMS programs must include a timetable to periodically assess the strategy following implementation. The FDA also may
condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications.
Further, product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety and efficacy, and the FDA has the
authority to prevent or limit further marketing of a product based on the results of these post-marketing programs. Moreover, changes to the conditions
established in an approved application, including changes in indications, labeling or manufacturing processes or facilities may require submission and FDA
approval of a new NDA or NDA supplement before the changes can be implemented. An NDA supplement for a new indication typically requires clinical
data similar to that supporting the original approval, and the FDA uses similar procedures in reviewing supplements as it does in reviewing original
applications.
Expedited development and review programs
The FDA offers a number of expedited development and review programs for qualifying product candidates, and we may seek one or more of these
programs for our current or future products.
Investigational drug products may be eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and
demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and
the specific indication for which it is being studied. The sponsor of a fast track product candidate has opportunities for frequent interactions with the review
team during product development and, once an NDA is submitted, the application may be eligible for priority review. A fast track product candidate may
also be eligible for rolling review, where the FDA may consider for review sections of the NDA on a rolling basis before the complete application is
submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines
that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.
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A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite
its development and review. A product candidate can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product
may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects
observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and
guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product, including involvement
of senior managers.
After an NDA is submitted for a product candidate, including a product candidate with a fast track designation and/or breakthrough therapy designation, the
NDA may be eligible for priority review. An NDA is eligible for priority review if the product candidate has the potential to provide a significant
improvement in the treatment, diagnosis or prevention of a serious disease or condition compared to marketed products. Depending on whether a drug
contains a new molecular entity, priority review designation means the FDA’s goal is to take an action on the marketing application within six months of
the 60-day filing date, compared with 12 months under standard review.
Additionally, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive
accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a
clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity
or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative
treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled confirmatory
clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit, and may require that such
confirmatory trials are underway prior to granting any accelerated approval. The FDA may withdraw approval of a drug or an indication approved under
accelerated approval if, for example, sponsor fails to conduct the confirmatory trial in a timely manner, or if the confirmatory trial fails to verify the
predicted clinical benefit of the product. In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated
approval, which could adversely impact the timing of the commercial launch of the product.
Fast track designation, breakthrough therapy designation, priority review and accelerated approval do not change the scientific or medical standards for
approval or the quality of evidence necessary to support approval, but they may expedite the development or review process. Even if a product qualifies for
one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or the time period for FDA
review or approval may not be shortened.
Orphan drug designation
We intend to pursue orphan drug designation for one or more of our product candidates with respect to certain oncology indications, as appropriate, with
the potential to obtain orphan drug exclusivity for our products, if approved.
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, which is a disease or condition
that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which there is no reasonable
expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in
the United States for that drug. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the
generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any
advantage in, or shorten the duration of, the regulatory review or approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is
entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for
the same disease or condition for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug
exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a
different disease or condition. Orphan drug exclusivity also could block the approval of a product for seven years if a competitor obtains approval of the
“same drug”, as defined, by the FDA or if a product candidate is determined to be contained within the approved product for the same disease or condition.
Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the application user fee.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the disease or condition for which it
received orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for
designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare
disease or condition.
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Pediatric information and pediatric exclusivity
Under the Pediatric Research Equity Act (PREA), certain NDAs and certain supplements to an NDA must contain data to assess the safety and efficacy of
the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for
which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. A deferral may be granted
for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are complete or that additional
safety or effectiveness data needs to be collected before the pediatric clinical trials begin. Generally, the FDA requires that a sponsor that is planning to
submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of
administration submit an initial Pediatric Study Plan (iPSP), within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as
practicable before the initiation of a Phase 3 or Phase 2/3 study. The iPSP must include an outline of the pediatric study or studies that the sponsor plans to
conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed
information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies
along with supporting information. The FDA and the sponsor must reach an agreement on the iPSP. A sponsor can submit amendments to an agreed-upon
iPSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical trials and/or
other clinical development programs.
A drug product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity
periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the
voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.
Post-approval requirements
Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements
relating to drug listing and registration, recordkeeping, periodic reporting, product sampling and distribution, adverse event reporting and advertising,
marketing and promotion. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. While
physicians may prescribe a product for uses in patient populations that are not described in the product’s approved labeling, or “off-label” uses,
manufacturers may only promote a product for the approved indications and in accordance with the provisions of the approved label of such product.
However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. The FDA and
other agencies actively enforce the laws and regulations prohibiting the promotion of “off-label” uses, and a company that is found to have improperly
promoted “off-label” uses may be subject to significant liability.
After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and
approval. There also are continuing user fee requirements, under which the FDA assesses an annual program fee for each product identified in an approved
NDA. In addition, quality-control, drug manufacture, packaging and labeling procedures must continue to conform to cGMP after approval. Drug
manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the
FDA subjects entities to periodic unannounced and announced inspections by the FDA and these state agencies, during which the applicable agency
inspects manufacturing facilities to assess compliance with cGMP requirements and other laws. FDA regulations also require investigation and correction
of any deviations from cGMP and impose reporting requirements upon manufacturers and their subcontractors. Accordingly, manufacturers must continue
to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory
compliance. The FDA may withdraw approval of a product if compliance with regulatory requirements is not maintained or if problems occur after the
product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or
frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other
restrictions under a REMS program.
Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market or product recalls;
fines, warning or untitled letters or holds on clinical studies;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product
approvals;
product seizure or detention, or refusal of the FDA to permit the import or export of products;
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mandated modifications of promotional materials and labeling and the issuance of corrective information;
the issuance of safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety
information about the product; or
injunctions or the imposition of civil or criminal penalties.
Manufacturers also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the
prohibition on promoting products for “off-label” use, industry-sponsored scientific and educational activities and promotional activities involving the
internet.
The FDA may also require post-approval studies and clinical trials if the FDA finds that scientific data, including information regarding related drugs,
deem it appropriate. The purpose of such studies can include, among other things, assessments designed to evaluate a known serious risk or signals of
serious risk related to the drug or to identify an unexpected serious risk when available data indicate the potential for a serious risk. The FDA may also
require a labeling change if it becomes aware of new safety information that it believes should be included in the labeling of a drug.
International Regulation
In addition to regulations in the United States, we could become subject to a variety of foreign regulations regarding development, approval, commercial
sales and distribution of our products if we seek to market our product candidates in other jurisdictions. Whether or not we obtain FDA approval for a
product, we must obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or
marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional
review periods, and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing, among other things, the
conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. Regulatory approval in one country does not
ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process
in others. If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory
approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Non-Clinical Studies and Clinical Trials
Similar to the United States, the various phases of non-clinical and clinical research in the European Union, or EU, are subject to significant regulatory
controls.
Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances. Non-clinical (pharmaco-
toxicological) studies must be conducted in compliance with the principles of GLP as set forth in EU Directive 2004/10/EC (unless otherwise justified for
certain particular medicinal products, e.g., radio-pharmaceutical precursors for radio-labeling purposes). In particular, non-clinical studies, both in vitro and
in vivo, must be planned, performed, monitored, recorded, reported and archived in accordance with the GLP principles, which define a set of rules and
criteria for a quality system for the organizational process and the conditions for non-clinical studies. These GLP standards reflect the Organization for
Economic Co-operation and Development requirements.
Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International Council for
Harmonization of Technical Requirements for Pharmaceuticals for Human Use (ICH), guidelines on Good Clinical Practices (GCP), as well as the
applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If the sponsor of the clinical trial is not
established within the EU, it must appoint an EU entity to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in
most EU member states, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial.
The regulatory landscape related to clinical trials in the EU has been subject to recent changes. The EU Clinical Trials Regulation (CTR), which was
adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. Unlike directives, the CTR is directly
applicable in all EU member states without the need for member states to further implement it into national law. The CTR notably harmonizes the
assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which contains a centralized EU portal
and database.
While the EU Clinical Trials Directive required a separate clinical trial application (CTA), to be submitted in each member state in which the clinical trial
takes place, to both the competent national health authority and an independent ethics committee, much like the FDA and IRB respectively, the CTR
introduces a centralized process and only requires the submission of a single application for multi-center trials. The CTR allows sponsors to make a single
submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The CTA must
include, among other things, a copy of the trial
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protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under
investigation. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a
separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s
decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed.
The CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. Clinical trials for
which an application was submitted (i) prior to January 31, 2022 under the EU Clinical Trials Directive, or (ii) between January 31, 2022 and January 31,
2023 and for which the sponsor has opted for the application of the EU Clinical Trials Directive remain governed by said Directive until January 31, 2025.
After this date, all clinical trials (including those which are ongoing) will become subject to the provisions of the CTR.
Medicines used in clinical trials must be manufactured in accordance with Good Manufacturing Practice (GMP). Other national and EU-wide regulatory
requirements may also apply.
Marketing Authorization
In order to market our product candidates in the EU and many other foreign jurisdictions, we must obtain separate regulatory approvals. More concretely, in
the EU, medicinal product candidates can only be commercialized after obtaining a marketing authorization (MA). To obtain regulatory approval of a
product candidate under EU regulatory systems, we must submit a MA application (MAA). The process for doing this depends, among other things, on the
nature of the medicinal product. There are two types of MAs.
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“Centralized MAs” are issued by the European Commission through the centralized procedure based on the opinion of the Committee for
Medicinal Products for Human Use, or CHMP, of the European Medicines Agency (EMA), and are valid throughout the EU. The centralized
procedure is compulsory for certain types of medicinal products such as (i) medicinal products derived from biotechnological processes, (ii)
designated orphan medicinal products, (iii) advanced therapy medicinal products (ATMPs) (such as gene therapy, somatic cell therapy and
tissue engineered products) and (iv) medicinal products containing a new active substance indicated for the treatment of certain diseases,
such as cancer, HIV/AIDS, diabetes, neurodegenerative diseases or autoimmune diseases and other immune dysfunctions, and viral diseases.
The centralized procedure is optional for products containing a new active substance not yet authorized in the EU, or for products that
constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU. Once the
evaluation is finalized, the EMA sends the CHMP’s opinion to the European Commission which has (maximum) 67 days to adopt a legally
binding decision and issue a MA.
“National MAs” are issued by the competent authorities of the EU member states, only cover their respective territory, and are available for
product candidates not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized for
marketing in an EU member state, this national MA can be recognized in another member state through the mutual recognition procedure. If
the product has not received a national MA in any member state at the time of application, it can be approved simultaneously in various
member states through the decentralized procedure. Under the decentralized procedure an identical dossier is submitted to the competent
authorities of each of the member states in which the MA is sought, one of which is selected by the applicant as the reference member state.
The timeframe to obtain national MAs varies depending on the concerned procedure. Under the mutual recognition procedure, the reference
member state (where the medicinal product is already authorized) must prepare the assessment report within 90 days. The concerned member
states have up to 90 days to recognize the decision of the reference member state, and approve the summary of product characteristics,
labeling and packaging. Then, each member state has a 30-day period to grant the national MA. Under the decentralized procedure, the
evaluation period is 120 days for the reference member state, followed by a 90-day period for the concerned member states to approve the
summary of product characteristics, labeling and packaging. Then, each member state has a 30-day period to grant the national MA. In order
to grant the MA, the EMA or the competent authorities of the EU member states make an assessment of the risk-benefit balance of the
product on the basis of scientific criteria concerning its quality, safety and efficacy. MAs have an initial duration of five years. After these
five years, the authorization may be renewed on the basis of a reevaluation of the risk-benefit balance.
Data and Marketing Exclusivity
In the EU, new products authorized for marketing (i.e., reference products) generally receive eight years of data exclusivity and an additional two years of
market exclusivity upon MA. If granted, the data exclusivity period prevents generic and biosimilar applicants from relying on the preclinical and clinical
trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA in the EU during a period of eight years from the
date on which the reference product was first authorized in the EU.
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The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until ten years have elapsed
from the initial MA of the reference product in the EU. The overall ten-year market exclusivity period can be extended to a maximum of 11 years if, during
the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications, which, during the scientific
evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee
that a product will be considered by the EU’s regulatory authorities to be a new chemical or biological entity, and products may not qualify for data
exclusivity.
Orphan Medicinal Products
The criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in the United States. A medicinal product can be
designated as an orphan if its sponsor can establish that: (1) the product is intended for the diagnosis, prevention or treatment of a life threatening or
chronically debilitating condition; (2) either (a) such condition affects not more than five in 10,000 persons in the EU when the application is made, or (b)
the product, without the benefits derived from the orphan status, would not generate sufficient return in the EU to justify the necessary investment; and (3)
there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized for marketing in the EU or, if
such method exists, the product will be of significant benefit to those affected by that condition.
Orphan designation must be requested before submitting an MAA. An EU orphan designation entitles a party to incentives such as reduction of fees or fee
waivers, protocol assistance, and access to the centralized procedure. Upon grant of a MA, orphan medicinal products are entitled to ten years of market
exclusivity for the approved indication, which means that the competent authorities cannot accept another MAA, or grant a MA, or accept an application to
extend a MA for a similar medicinal product for the same indication for a period of ten years. The period of market exclusivity is extended by two years for
orphan medicinal products that have also complied with an agreed pediatric investigation plan (PIP). No extension to any supplementary protection
certificate can be granted on the basis of pediatric studies for orphan indications. Orphan designation does not convey any advantage in, or shorten the
duration of, the regulatory review and approval process.
The orphan exclusivity period may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for
which it received orphan destination, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity
or where the prevalence of the condition has increased above the threshold. Additionally, MA may be granted to a similar product for the same indication at
any time if: (i) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (ii) the applicant
consents to a second orphan medicinal product application; or (iii) the applicant cannot supply enough orphan medicinal product.
The aforementioned EU rules are generally applicable in the European Economic Area (EEA), which consists of the 27 EU member states plus Norway,
Liechtenstein and Iceland.
Brexit and the Regulatory Framework in the United Kingdom
Since the end of the Brexit transition period on January 1, 2021, Great Britain (GB) (comprising England, Scotland and Wales) has not been directly
subject to EU laws, but under the terms of the Ireland/Northern Ireland Protocol, EU laws generally apply to Northern Ireland. The EU laws that have been
transposed into United Kingdom (UK) law through secondary legislation remain applicable in GB, but new legislation such as the (EU) CTR is not
applicable in GB.
The MHRA has introduced changes to national licensing procedures, including procedures to prioritize access to new medicines that will benefit patients,
including a 150-day assessment and a rolling review procedure. In order to obtain a UK MA to commercialize products in the UK, an applicant must be
established in the UK and must follow one of the UK national authorization procedures or one of the remaining post-Brexit international cooperation
procedures to obtain an MA to commercialize products in the UK. Since January 1, 2024, a new International Recognition procedure has been in place
whereby the MHRA has been able to conduct targeted assessments of an MAA by recognizing approvals from trusted partner agencies such as the
European Commission. Additionally, the ‘Unfettered Access Procedure’ enables an MA holder in Northern Ireland to seek recognition in GB.
The UK regulatory framework in relation to clinical trials is derived from existing EU legislation (as implemented into UK law, through secondary
legislation). On January 17, 2022, the MHRA launched an eight-week consultation on reframing the UK legislation for clinical trials, which aimed to
streamline clinical trials approvals, enable innovation, enhance clinical trials transparency, enable greater risk proportionality, and promote patient and
public involvement in clinical trials. The MHRA published its consultation outcome on March 21, 2023 in which it confirmed that it would update the
existing legislation. The resulting legislative changes, which are yet to be published, will ultimately determine the extent to which the UK regulations align
with the (EU) CTR. Under the terms of the Protocol on Ireland and Northern Ireland, provisions of the (EU) CTR which relate to the manufacture and
import of investigational medicinal products and auxiliary medicinal products currently apply in Northern Ireland.
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Other Healthcare Laws
Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and
foreign jurisdictions in which they conduct their business. Such laws include, without limitation, U.S. federal and state anti-kickback, fraud and abuse, false
claims, consumer fraud, pricing reporting, and transparency laws and regulations as well as similar foreign laws in jurisdictions outside the U.S.
For example, the federal Anti-Kickback Statute prohibits, among other things, individuals or entities from knowingly and willfully offering, paying,
soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind to induce or in return for purchasing, leasing, ordering or
arranging for or recommending the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare
programs. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation.
The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit, among other things, any individual or entity from knowingly
presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be made or used a
false record or statement material to a false or fraudulent claim to the federal government. In addition, the government may assert that a claim including
items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False
Claims Act.
The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), created additional federal civil and criminal statutes that prohibit,
among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program. Similar to the federal Anti-Kickback Statute, a
person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to
have committed a violation.
The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is
available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to
payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-
physician practitioners (defined to include physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology
assistants and certified nurse midwives) and teaching hospitals, and further requires applicable manufacturers and applicable group purchasing
organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.
Similar state and local laws and regulations may also restrict business practices in the pharmaceutical industry, such as state anti-kickback and false claims
laws, which may apply to business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving
healthcare items or services reimbursed by non-government third-party payors, including private insurers, or by patients themselves; state laws that require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state
laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information or which require tracking gifts and other
remuneration and items of value provided to physicians, other healthcare providers and entities; and state and local laws that require the registration of
pharmaceutical sales representatives.
Violation of any of such laws or any other government regulations that apply may result in penalties, including, without limitation, civil and criminal
penalties, damages, fines, additional reporting obligations, the curtailment or restructuring of operations, exclusion from participation in government
healthcare programs and individual imprisonment.
Data privacy and Security
We may be subject to numerous federal, state and foreign laws, regulations that govern the collection, use, disclosure and protection of health-related and
other personal information. In the United States, numerous federal and state laws and regulations, including data breach notification laws, health
information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure and protection of health-related
and other personal information. In addition, certain foreign laws govern the privacy and security of personal data, including health-related data. Privacy and
security laws, regulations and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts and can result in
investigations, proceedings or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.
Coverage and Reimbursement
Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state and
foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by
third-party payors. Significant uncertainty exists as to the coverage and reimbursement
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status of any newly approved product. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan
basis. One third-party payor’s decision to cover a particular product does not ensure that other payors will also provide coverage for the product. As a
result, the coverage determination process can require manufacturers to provide scientific and clinical support for the use of a product to each payor
separately and can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in
the first instance.
In addition, third-party payors are increasingly reducing reimbursements for pharmaceutical products and services. The U.S. government and state
legislatures have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and
requirements for substitution of generic products. Third-party payors are increasingly challenging the prices charged, examining the medical necessity and
reviewing the cost effectiveness of pharmaceutical products, in addition to questioning their safety and efficacy. Adoption of price controls and cost-
containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any
product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product at all could reduce physician
usage and patient demand for the product.
In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on
specific products and therapies. For example, the EU provides options for its member states to restrict the range of medicinal products for which their
national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a
specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the
medicinal product on the market. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price
controls on pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be
considered medically reasonable and necessary for a specific indication, will be considered cost-effective by third-party payors, that an adequate level of
reimbursement will be established even if coverage is available or that the third-party payors’ reimbursement policies will not adversely affect the ability of
manufacturers to sell products profitably.
Healthcare Reform
In the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory
changes to the healthcare system. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act (the ACA), was signed into law, which substantially changed the way healthcare is financed by both government and private insurers in
the United States. The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement
adjustments and fraud and abuse changes. Additionally, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand
name drugs from 15.1% to 23.1%; required collection of rebates for drugs paid by Medicaid managed care organizations; imposed a non-deductible annual
fee on pharmaceutical manufacturers or importers that sell certain “branded prescription drugs” to specified federal government programs; expanded
eligibility criteria for Medicaid programs; created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct
comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare and Medicaid Innovation at CMS
to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Since its enactment, there have been judicial, executive and congressional challenges to certain aspects of the ACA. In June 2021, the U.S. Supreme Court
dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.
Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers,
which will remain in effect through 2032, with the exception of a temporary suspension that occurred from May 1, 2020 through March 31, 2022, absent
additional congressional action. Moreover, there has recently been heightened government scrutiny over the manner in which manufacturers set prices for
their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring
more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program
reimbursement methodologies for pharmaceutical products. On August 16, 2022, the IRA was signed into law. Among other things, the IRA requires
manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), imposes rebates under Medicare Part B and Medicare
Part D to penalize price increases that outpace inflation (first due in 2023) and replaces the Part D coverage gap discount program with a new discounting
program (beginning in 2025). The IRA permits the Secretary of the Department of Health and Human Services to implement many of these provisions
through guidance, as opposed to regulation, for the initial years. In August 2023, HHS announced the list of the first ten drugs that will be subject to price
negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges. For that and other reasons, it is currently
unclear how the IRA will be effectuated.
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Individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency
measures and, in some cases, mechanisms to encourage importation from other countries and bulk purchasing. Furthermore, there has been increased
interest by third-party payors and government authorities in reference pricing systems and publication of discounts and list prices.
We expect that additional state, federal and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that
federal, state and foreign governments will pay for healthcare product candidates and services, which could result in reduced demand for our product
candidates once approved or additional pricing pressures.
Employees and Human Capital Resources
As of December 31, 2023, we had 378 full-time employees, including 145 employees who have M.D. or Ph.D. degrees. Within our workforce, as of
December 31, 2023, 308 employees were engaged in research and development. None of our employees are represented by labor unions or covered by
collective bargaining agreements. We consider our relationship with our employees to be good.
Our human capital resources objectives include meeting hiring goals, deepening our oncology and public company expertise, integrating new employees,
and retaining, incentivizing and developing our existing employees. We provide competitive compensation and benefit programs, including competitive
salaries, incentive programs, equity awards, an employee stock purchase plan, healthcare and insurance benefits. The principal purposes of our equity
incentive programs are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation
awards and to align the interests of these individuals with those of our stockholders. We regularly review our compensation practices to support our
employees, including evaluating innovative health and wellness programs to continue to respond to employee needs.
We are committed to creating an environment where diverse perspectives are encouraged and supported. This commitment is memorialized as one of our
corporate core values (Inclusiveness and Fairness) and is brought to life for every employee during our cultural integration sessions for new hires and
through an informal network of cultural champions that we foster. As of December 31, 2023, females represented 56% of our full-time employees, and 300
of our employees self-identified their race, of which 53% self-identified as an “underrepresented minority,” as this term is defined by Nasdaq rules.
We are equally committed to the development of our employees and one of our corporate core values (Exceptional Together) captures this commitment. We
offer our employees career-specific training and resources and support development opportunities through company-sponsored programs, including
learning, mentoring, and coaching opportunities. We host regular company-wide sessions where our employees discuss ideas related to corporate initiatives
and scientific breakthroughs and recognize each other’s contributions. In addition, we conduct an anonymous all-employee engagement survey at least
annually, and take the results of this survey into account in management of our employees and business.
Corporate Information
We were founded in October 2014 as a Delaware corporation. Our principal executive offices are located at 700 Saginaw Drive, Redwood City, California
94063, and our telephone number is (650) 481-6801.
On November 9, 2023, we completed the announced acquisition of EQRx, Inc., a Delaware corporation (EQRx), pursuant to an Agreement and Plan of
Merger, dated as of July 31, 2023. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Acquisition of
EQRx, Inc”.
Our website address is www.revmed.com. We make available on or through our website certain reports and amendments to those reports that we file with or
furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended (the Exchange Act). These include our annual reports on Form 10-
K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act. We make this information available on or through our website free of charge as soon as reasonably practicable after we
electronically file the information with, or furnish it to, the SEC. References to our website address do not constitute incorporation by reference of the
information contained on the website, and the information contained on the website is not part of this document or any other document that we file with or
furnish to the SEC. The SEC maintains a site on the worldwide web that contains reports, proxy and information statements and other information
regarding our filings at www.sec.gov.
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Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in
this Annual Report on Form 10-K, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” before deciding whether to invest in our common stock. The occurrence of any of the events or
developments described below or other risks we face could materially and adversely affect our business, competitive position, financial condition, results of
operations, cash flows and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your
investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and
the market price of our common stock.
Risks related to our limited operating history, financial position and need for additional capital
We are a clinical-stage precision oncology company with a limited operating history and no products approved for commercial sale. We have incurred
significant losses since inception. We expect to incur losses for at least the next several years and may never achieve or maintain profitability, which,
together with our limited operating history, makes it difficult to assess our future viability.
Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are a clinical-stage precision
oncology company, and we have only a limited operating history upon which you can evaluate our business and prospects. We currently have no products
approved for commercial sale, have not generated any revenue from sales of products and have incurred losses in each year since our inception in October
2014. In addition, we have limited experience as a company and have not yet demonstrated an ability to successfully overcome many of the risks and
uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical industry.
Since inception, we have incurred significant net losses. Our net losses were $436.4 million, $248.7 million and $187.1 million, for the years ended
December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $1,137.7 million. We have funded our
operations to date primarily with proceeds from the sale of common stock and preferred stock and upfront payments and research and development cost
reimbursement received under our collaboration agreement with Genzyme Corporation, an affiliate of Sanofi (the Sanofi Agreement). The Sanofi
Agreement was terminated in June 2023, and Sanofi has no further reimbursement obligations post this termination. To date, we have devoted substantially
all of our resources to organizing and staffing our company, business planning, raising capital, acquiring and discovering development programs, securing
intellectual property rights and conducting discovery, research and development activities for our programs. We have not yet demonstrated our ability to
successfully complete any clinical trials, including pivotal clinical trials, obtain marketing approvals, manufacture a commercial-scale product, or arrange
for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Our product
candidates will require substantial additional development time and resources before we will be able to apply for or receive regulatory approvals and, if
approved, begin generating revenue from product sales. We expect to continue to incur significant expenses and operating losses for the foreseeable future.
We have never generated revenue from product sales and may never be profitable.
Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with our collaboration partners, to successfully
complete the development of, and obtain the regulatory approvals necessary to commercialize, our development programs. We do not anticipate generating
revenue from product sales for the next several years, if ever. Our ability to generate future revenue from product sales depends heavily on our, and any
potential future collaborators’, success in:
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completing clinical and preclinical development of product candidates and programs and identifying and developing new product candidates;
seeking and obtaining marketing approvals for our product candidates;
launching and commercializing product candidates for which we obtain marketing approval by establishing a sales force, marketing, medical
affairs and distribution infrastructure or, alternatively, collaborating with a commercialization partner;
achieving adequate coverage and reimbursement by third-party payors for our product candidates;
establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality,
products and services to support clinical development and the market demand for our product candidates, if approved;
obtaining market acceptance of our product candidates as viable treatment options, if approved;
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addressing any competing technological and market developments;
negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations in
such collaborations;
maintaining, protecting, enforcing and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how;
defending against third-party interference, infringement or other intellectual property-related claims, if any; and
attracting, hiring and retaining qualified personnel.
Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with commercializing
any approved product candidate, including prior to a potential launch of any approved product candidate. Our expenses could increase beyond expectations
if we are required by the U.S. Food and Drug Administration (the FDA), the European Medicines Agency (the EMA) or other regulatory agencies to
perform clinical trials or studies in addition to those that we currently anticipate. Even if we are able to generate revenue from the sale of any approved
products, we may not become profitable and may need to obtain additional funding to continue operations.
We are subject to various risks related to the acquisition of EQRx.
We completed the acquisition of EQRx, Inc. (EQRx) (the EQRx Acquisition) on November 9, 2023. Risks, contingencies and other uncertainties that could
adversely affect our business, financial condition and results of operations following the acquisition, and any anticipated benefits of the acquisition,
include:
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the effect of the EQRx Acquisition on our ability to attract, motivate, retain and hire key personnel and maintain our relationships with
suppliers, collaboration partners and others with whom we do business, or on our respective operating results and business generally;
the diversion of our management’s attention from our ongoing business operations;
the risk that the anticipated benefits of the EQRx Acquisition may otherwise not be fully realized; and
risks that restructuring costs and charges and other liabilities may be greater than anticipated or incurred in different periods than anticipated
or that the wind-down of EQRx’s research and development portfolio will be more costly or take longer than anticipated.
We or EQRx may be targets of securities class action and derivative lawsuits related to the EQRx Acquisition which could result in substantial costs.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the
lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment
could result in monetary damages.
We will require substantial additional financing to achieve our goals, which may not be available on acceptable terms, or at all. A failure to obtain this
necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
Our operations have consumed substantial amounts of cash since inception. Since our inception, we have invested a significant portion of our efforts and
financial resources in research and development activities for our initial preclinical and clinical product candidates.
Preclinical studies, clinical trials and additional research and development activities will require substantial funds to complete. As of December 31, 2023,
we had cash, cash equivalents and marketable securities of $1,853.0 million. We have raised $1,271.4 million in underwritten public offerings, including
our IPO in February 2020, net of underwriting discounts and commissions and offering expenses and have completed sales generating $122.1 million in net
proceeds (after deducting commissions and expenses) pursuant to our at-the-market equity offering program with Cowen and Company, LLC (Cowen). The
EQRx Acquisition added $1.1 billion to our working capital. We expect to continue to spend substantial amounts to continue the preclinical and clinical
development of our current and future programs and to prepare for their potential commercialization. If we are able to gain marketing approval for our
product candidates, we will require significant additional amounts of cash in order to launch and commercialize our product candidates, if approved, to the
extent that their launch and commercialization are not the responsibility of another collaborator that we may contract with in the future. In addition, other
unanticipated costs may arise. Because the design and outcome of our current,
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planned and potential future clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the
development and commercialization of any product candidate we develop.
The timing and amount of our future funding requirements depends on many factors, including:
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the scope, progress, results and costs of researching and developing our product candidates and programs, and of conducting preclinical
studies and clinical trials;
the timing of, and the costs involved in, obtaining marketing approvals for our product candidates if clinical trials are successful;
the cost of commercialization activities for any of our product candidates, whether alone or in collaboration, including marketing, sales and
distribution costs if any product candidate is approved for sale;
the cost of manufacturing our current and future product candidates for clinical trials in preparation for marketing approval and in preparation
for commercialization;
our ability to establish and maintain strategic licenses or other arrangements and the financial terms of such agreements;
the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs
and the outcome of such litigation;
the timing, receipt and amount of sales of, profit share or royalties on, our future products, if any;
the emergence of competing cancer therapies or other adverse market developments; and
any plans to acquire or in-license other programs or technologies.
We do not have any committed external source of funds or other support for our development efforts. We expect to finance our cash needs through a
combination of the EQRx Acquisition, public or private equity offerings, debt financings, credit or loan facilities, collaborations, strategic alliances,
licensing arrangements and other marketing or distribution arrangements. In addition, we may seek additional capital due to favorable market conditions or
strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. Additional funds may not
be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required
to:
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delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities or eliminate one or more of our
development programs altogether; or
delay, limit, reduce or terminate our efforts to establish manufacturing and sales and marketing capabilities or other activities that may be
necessary to commercialize any future approved products, or reduce our flexibility in developing or maintaining our sales and marketing
strategy.
Our operating results may fluctuate significantly, which will make our future results difficult to predict and could cause our results to fall below
expectations.
Our quarterly and annual operating results may fluctuate significantly, which will make it difficult for us to predict our future results. These fluctuations
may occur due to a variety of factors, many of which are outside of our control and may be difficult to predict, including:
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the timing and cost of, and level of investment in, research, development and commercialization activities, which may change from time to
time;
the timing and status of enrollment for our clinical trials;
the timing of regulatory approvals, if any, in the United States and internationally;
the timing of expanding our operational, financial and management systems and personnel, including personnel to support our clinical
development, quality control, manufacturing and commercialization efforts and our operations as a public company;
the cost of manufacturing, as well as building out our supply chain, which may vary depending on the quantity of productions, and the terms
of any agreements we enter into with third-party suppliers;
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timing and amount of any milestone, royalty or other payments due under any current or future collaboration or license agreement;
coverage and reimbursement policies with respect to any future approved products, and potential future drugs that compete with our
products;
the timing and cost to establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any products for which we
may obtain marketing approval and intend to commercialize on our own or jointly with one or more collaborators;
expenditures that we may incur to acquire, develop or commercialize additional products and technologies;
the level of demand for any future approved products, which may vary significantly over time;
future accounting pronouncements or changes in our accounting policies; and
the timing and success or failure of preclinical studies and clinical trials for our product candidates or competing product candidates, or any
other change in the competitive landscape of our industry, including consolidation among our competitors or collaboration partners.
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result,
comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our
future performance.
This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If
our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts
we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price
decline could occur even when we have met any previously publicly stated revenue or operating guidance we may provide.
Risks related to product development and regulatory process
We are early in our development efforts. Our business is dependent on the successful development of our current and future product candidates. If we
are unable to advance our current or future product candidates through clinical trials, obtain marketing approval and ultimately commercialize any of
our product candidates, or experience significant delays in doing so, our business will be materially harmed.
We are early in our development efforts. Only certain of our product candidates are being evaluated in clinical trials whereas our other programs are in the
preclinical stage. We have invested substantially all of our efforts and financial resources in the identification of targets and preclinical development of
small molecules to treat cancer. The success of our business, including our ability to finance our company and generate revenue from products in the future,
which we do not expect will occur for several years, if ever, will depend heavily on the successful development and eventual commercialization of our
product candidates, which may never occur. Our current product candidates, and any of our future product candidates, will require additional preclinical
and clinical development, management of clinical, preclinical and manufacturing activities, marketing approval in the United States and other markets,
demonstrating effectiveness to pricing and reimbursement authorities, obtaining sufficient manufacturing supply for both clinical development and
commercial production, building of a commercial organization, and substantial investment and significant marketing efforts before we generate any
revenues from product sales.
We have not previously submitted a new drug application (NDA) to the FDA or similar applications to a comparable foreign regulatory authority, for any
product candidate. An NDA or other relevant regulatory application must include extensive preclinical and clinical data and supporting information to
establish that the product candidate is safe and effective for each desired indication. The NDA or other relevant application must also include significant
information regarding the chemistry, manufacturing and controls for the product. We cannot be certain that our current or future product candidates will be
successful in clinical trials or receive regulatory approval. Further, even if they are successful in clinical trials, our product candidates or any future product
candidates may not receive regulatory approval. If we do not receive regulatory approvals for current or future product candidates, we may not be able to
continue our operations. Even if we successfully obtain regulatory approval to market a product candidate, our revenue will depend, in part, upon the size
of the markets in the territories for which we gain regulatory approval and have commercial rights, as well as the availability of competitive products,
whether there is sufficient third-party reimbursement and adoption by physicians.
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We plan to seek regulatory approval to commercialize our product candidates both in the United States and in select foreign countries. While the scope of
regulatory approval generally is similar in other countries, in order to obtain separate regulatory approval in other countries we must comply with numerous
and varying regulatory requirements of such countries regarding safety and efficacy. Other countries also have their own regulations governing, among
other things, clinical trials and commercial sales, as well as pricing and distribution of drugs, and we may be required to expend significant resources to
obtain regulatory approval and to comply with ongoing regulations in these jurisdictions.
The success of our current and future product candidates will depend on several factors, including the following:
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successful completion of clinical trials and preclinical studies;
sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;
allowance to proceed with clinical trials under Investigational New Drug applications (INDs) by the FDA or under comparable applications
by comparable regulatory authorities for our planned clinical trials or future clinical trials;
successful enrollment and completion of clinical trials, particularly where competitors may also be recruiting patients;
data from our clinical programs that supports an acceptable risk-benefit profile of our product candidates in the intended populations;
receipt and maintenance of marketing approvals from applicable regulatory authorities;
establishing agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if one of our
product candidates is approved;
entry into collaborations to further the development of our product candidates;
obtaining and maintaining our portfolio of intellectual property rights, including patents, trade secrets and know-how;
enforcing and defending intellectual property rights and claims;
obtaining and maintaining regulatory exclusivity for our product candidates;
successfully launching commercial sales of our product candidates, if approved;
acceptance of the product candidate’s benefits and uses, if approved, by patients, the medical community and third-party payors;
the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates prior to or
following any approval;
effectively competing with other therapies; and
obtaining and maintaining healthcare coverage and adequate reimbursement from third-party payors.
If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to
successfully commercialize our product candidates, which would materially harm our business. If we do not receive marketing approvals for any product
candidate we develop, we may not be able to continue our operations.
Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely
affect our ability to obtain regulatory approvals or commercialize our product candidates on a timely basis or at all, which would have an adverse effect
on our business.
In order to obtain approval from the FDA or comparable foreign authorities to market a new small molecule product, we must demonstrate proof of safety
and efficacy in humans. To meet these requirements, we will have to conduct adequate and well-controlled clinical trials. Before we can commence clinical
trials for a product candidate, we must complete extensive preclinical studies that support our planned INDs in the United States. We cannot be certain of
the timely completion or outcome of our preclinical studies and cannot predict if the FDA or foreign authorities will accept our proposed clinical programs
or if the outcome of our preclinical studies will ultimately support further development of our programs. As a result, we cannot be sure that we will be able
to submit INDs or similar applications on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will
result in the FDA or other regulatory authorities allowing clinical trials to begin.
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Conducting preclinical testing is a lengthy, time-consuming and expensive process. The length of time may vary substantially according to the type,
complexity and novelty of the program, and often can be several years or more per program. Delays associated with programs for which we are directly
conducting preclinical studies may cause us to incur additional operating expenses. Moreover, we may be affected by delays or decisions to discontinue
development associated with the studies of certain programs that are the responsibility of our current or potential future partners over which we have no
control. The commencement and rate of completion of preclinical studies and clinical trials for a product candidate may be delayed by many factors,
including, for example:
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inability to generate sufficient preclinical or other in vivo or in vitro data to support the initiation of clinical studies;
delays in reaching a consensus with regulatory agencies on study design and obtaining regulatory allowance or authorization to commence
clinical trials; and
obtaining sufficient quantities of starting materials, intermediate materials and our product candidates for use in preclinical studies and
clinical trials from third-party suppliers on a timely basis.
Moreover, even if clinical trials do begin for our preclinical programs, our development efforts may not be successful, and clinical trials that we conduct or
that third parties conduct on our behalf may not demonstrate sufficient safety or efficacy to obtain the requisite regulatory approvals for any of our product
candidates. Even if we obtain positive results from preclinical studies or initial clinical trials, we may not achieve the same success in future trials.
Historically, direct inhibition of any RAS protein has been challenging due to a lack of tractable, or “druggable,” binding pockets. Given this approach
is unproven, it may not be successful.
Historically, direct inhibition of any RAS protein has been challenging due to a lack of tractable, or “druggable,” binding pockets. Our tri-complex
technology has enabled us to design potent, cell-active inhibitors of multiple mutant RAS(ON) proteins. We are not aware of any programs in clinical
development that have successfully targeted any RAS(ON) protein. We cannot be certain that our approach will lead to the development of approvable or
marketable products, alone or in combination with other therapies.
The results of preclinical studies and early-stage clinical trials may not be predictive of future results.
The results of preclinical studies may not be predictive of the results of clinical trials, and the results of any early-stage clinical trials we commence may
not be predictive of the results of the later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and
efficacy despite having progressed through preclinical studies and initial clinical trials. For example, historically, targeted therapies have been susceptible
to resistance mutations in cancer cells that facilitate escape from anti-tumor response. Should such resistance mutations arise in patients being treated with
our product candidates, the clinical benefit associated with those candidates may be compromised. We are currently planning pivotal clinical trials for our
RAS(ON) inhibitors, and these pivotal studies may not produce results that are consistent with expectations or that are predicted by our initial clinical
observations for these compounds.
There can be no assurance that any of our current or future clinical trials will ultimately be successful or support further clinical development of any of our
product candidates. There is a high failure rate for drugs proceeding through clinical trials. A number of companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies. Even if our
clinical trials are completed, the results may not be sufficient to obtain regulatory approval of any products.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise be adversely
affected.
The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of
patients who remain in the trial until its conclusion. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to
locate and enroll a sufficient number of eligible patients to participate in these trials to such trial’s conclusion as required by the FDA or other comparable
regulatory authorities. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The enrollment of patients depends
on many factors, including:
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the patient eligibility criteria defined in the protocol;
our ability to enroll a sufficient number of patients with mutations in the signaling pathways our therapies are designed to target;
the size of the patient population required for analysis of the trial’s primary endpoints;
the proximity of patients to study sites;
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the design of the trial;
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available
therapies, including any new products that may be approved for the indications we are investigating;
our ability to obtain and maintain patient consents for participation in our clinical trials and, where appropriate, biopsies for future patient
enrichment efforts;
the risk that patients enrolled in clinical trials will not remain on the trial through the completion of evaluation; and
the ability of our clinical trial investigators to enroll patients in cases of outbreak of disease, geopolitical or other conflicts or natural
disasters.
In addition, our clinical trials will compete with approved therapies, including sotorasib and adagrasib, as well as other clinical trials for product candidates
that are in the same therapeutic areas (and that seek to evaluate patients with cancer cells having the same mutations, particularly with patients having
KRAS G12C or KRAS G12D mutations) as our current and potential future product candidates. This competition and competition with approved therapies
will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to pursue a
treatment regime using an approved therapy or enroll in a trial conducted by one of our competitors. Because the number of qualified clinical investigators
is limited, we conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients
who are available for our clinical trials at such sites. Moreover, because our current and potential future product candidates may represent a departure from
more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as
chemotherapy, rather than enroll patients in our ongoing or any future clinical trials.
In addition, the ongoing armed conflict between Russia and Ukraine or related actions may affect European clinical sites for our clinical studies. See the
risk factor entitled “The ongoing armed conflict between Russia and Ukraine and resulting actions could adversely affect our business, financial condition,
and results of operations” for a further description of risks related to this conflict.
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of clinical trials, which could prevent completion of these
trials and adversely affect our ability to advance the development of our product candidates.
We are currently developing, and may in the future develop, our product candidates in combination with other therapies, which exposes us to additional
risks.
The development of RMC-4630 has included combinations with Amgen’s KRAS(OFF) G12C inhibitor sotorasib, Mirati’s KRAS(OFF) G12C inhibitor
adagrasib and Merck’s PD-1 inhibitor pembrolizumab, and we may in the future, develop our product candidates in combination with one or more
approved cancer therapies. Even if any product candidate we develop were to receive marketing approval or be commercialized for use in combination with
other existing therapies, we would continue to be subject to the risks that the FDA or similar regulatory authorities outside of the United States could
revoke approval of the therapy used in combination with our product candidate or that safety, efficacy, manufacturing or supply issues could arise with
these existing therapies. Combination therapies are commonly used for the treatment of cancer, and we would be subject to similar risks if we develop any
of our product candidates for use in combination with other drugs or for indications other than cancer. This could result in our own products being removed
from the market or being less successful commercially. In addition, developing combination therapies using approved therapeutics, are doing and may
continue to do for our product candidates, also exposes us to additional clinical risks, such as the requirement that we demonstrate the safety and efficacy of
each active component of any combination regimen we may develop, including any incremental benefits associated with our product candidates, which
may prove challenging.
We or our collaborators may also evaluate our current or future product candidates in combination with one or more other cancer therapies that have not yet
been approved for marketing by the FDA or similar regulatory authorities outside of the United States or with approved cancer therapies at an unapproved
dose and/or schedule, and/or with approved cancer therapies in unapproved indications. For example, we have agreed to provide RMC-4630 to the
Netherlands Cancer Institute to support its evaluation of RMC-4630 in combination with Eli Lilly’s ERK inhibitor LY3214996 and we are planning a
clinical trial evaluating the combination of our compounds RMC-6236 and RMC-6291. We will not be able to market and sell any product candidate we
develop in combination with any such cancer therapies, outside existing approved labels that do not ultimately obtain marketing approval.
If the FDA or similar regulatory authorities outside of the United States do not approve the drugs we choose to evaluate in combination with or any product
candidate we develop or revoke their approval of, or if safety, efficacy, manufacturing, or supply issues arise with, these drugs, we may be unable to obtain
approval of or market or any product candidate we develop.
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We face significant competition, and if our competitors develop and market products that are more effective, safer or less expensive than our product
candidates, our commercial opportunities will be negatively impacted.
The life sciences industry is highly competitive. We are currently developing therapies that will compete, if approved, with other products and therapies
that currently exist or are being developed. Products we may develop in the future are also likely to face competition from other products and therapies,
some of which we may not currently be aware of. We have competitors both in the United States and internationally, including major multinational
pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities and other research institutions. Many of
our competitors have significantly greater financial, manufacturing, marketing, product development, technical and human resources than we do. Large
pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining marketing approvals, recruiting patients and manufacturing
pharmaceutical products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that
have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading companies and research
institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license
novel compounds that could make our product candidates obsolete. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result
in even more resources being concentrated among a smaller number of our competitors. As a result of all of these factors, our competitors may succeed in
obtaining patent protection and/or marketing approval or discovering, developing and commercializing products in our field before we do.
There are a number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies.
These treatments consist of small molecule drug products, biologics, cell-based therapies and traditional chemotherapy. Smaller and other early stage
companies may also prove to be significant competitors. In addition, academic research departments and public and private research institutions may be
conducting research on compounds that could prove to be competitive.
There are several programs in clinical development targeting KRAS G12C, including programs directed at KRAS(OFF) G12C being conducted by Amgen
Inc., Betta Pharmaceuticals Co., Ltd., Bristol Myers Squibb, Chengdu Huajian Future Technology Co. Ltd., D3 BIO, Inc., Eli Lilly, GenEros Biopharma
Ltd., Genhouse Bio Co. Ltd., Guangzhou BeBetter Medicine Technology Co., Ltd., HUYA Bioscience, Innovent Biologics, Inc. (licensed to Genfleet
Therapeutics), InventisBio, Jacobio Pharmaceuticals Co. Ltd., Jiangsu Hansoh Pharmaceutical Group Co., Ltd., Merck, Sharpe & Dohme LLC, Novartis
AG, Roche, Shanghai Junshi Biosciences Co., Ltd., Shanghai YingLi Pharmaceutical, Shouyao Holdings (Beijing) Co. Ltd. and Suzhou Zelgen
Biopharmaceuticals. BridgeBio Pharma, Inc. has a KRAS(ON) G12C program in the clinic. There are also several clinical programs directed at KRAS
G12D, including those being conducted by Astellas Pharma Inc., Bristol Myers Squibb, Incyte Corporation and Jiangsu Hengrui Pharmaceuticals Company
Ltd. Other clinical programs directed at mutant RAS are being conducted, including those by Alaunos Therapeutics, Inc., Boehringer Ingelheim, Chugai
Pharmaceutical Co., Ltd., Elicio Therapeutics, Gritstone bio, Inc., Moderna, Inc., Quanta Therapeutics, RasCal Therapeutics, Shanghai YingLi
Pharmaceutical, Silenseed Ltd. and Targovax ASA. There are several programs in clinical development targeting SHP2, including those being conducted
by Betta Pharmaceuticals Co., Ltd., Etern BioPharma (Shanghai) Co. Ltd., Genhouse Bio Co. Ltd., Hutchmed Ltd., HUYA Bioscience, InnoCare Pharma
Ltd., Jacobio Pharmaceuticals Co. Ltd., Jiangsu Hansoh Pharmaceutical Group Co., Ltd., Nanjing Sanhome Pharmaceutical, Navire Pharma, Inc., a
BridgeBio company (licensed to Bristol-Myers Squibb Company, Inc.), Novartis AG, Pfizer, Inc., Relay Therapeutics, Inc. (licensed to Roche), Shanghai
Gopherwood Biotech Co., Ltd. and Shanghai Ringene Biopharma Co., Ltd. The above list includes corporate competitors that we are currently aware of
and that are currently conducting clinical trials or marketing in geographies where we currently anticipate conducting clinical trials for our product
candidates. However, companies operating in other geographies and smaller and other early-stage companies may also prove to be significant competitors.
In addition, academic research departments and public and private research institutions may be conducting research on compounds that could prove to be
competitive.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have
fewer or less severe effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed or are less expensive than any
products that we may develop. Our competitors also may obtain FDA, EMA or other marketing approval for their products more rapidly than we may
obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if our
product candidates achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then,
resulting in reduced competitiveness.
Third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. In addition, the biopharmaceutical
industry is characterized by rapid technological change. If we fail to stay at the forefront of technological change, we may be unable to compete effectively.
Technological advances or products developed by our competitors may render our product candidates obsolete, less competitive or not economical.
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Some of our programs focus on the discovery and development of “Beyond Rule of 5” small molecules. Such molecules can be associated with longer
development timelines and greater costs compared to traditional small molecule drugs. Our “Beyond Rule of 5” product candidates may take longer to
develop and/or manufacture relative to traditional small molecules, and we may not be able to formulate “Beyond Rule of 5” candidates for certain
routes of administration.
We enlist various technologies and capabilities that give us chemical access to challenging sites on target proteins that generally are not accessible using
conventional small molecule drug discovery approaches. For each target, we consider the specific structural, physico-chemical, functional and dynamic
properties of the target and deploy the approach or approaches that appear most likely to yield viable development candidates. The “Rule of 5” is a set of
criteria used in pharmaceutical drug development to determine whether chemical compounds have certain physico-chemical properties that make them
likely to be orally active drugs in humans. In some instances, the compounds we discover and develop are traditional small molecules (i.e., less than 500
daltons) with properties that generally satisfy conventional pharmaceutical “Rule of 5” criteria, while in other cases, they are larger (i.e., more than 500
daltons) “Beyond Rule of 5” (BRo5) compounds that do not satisfy these criteria. For example, our mTORC1 program and our RAS(ON) Inhibitors each
include pursuit of BRo5 compounds.
BRo5 compounds have been successfully pursued by many pharmaceutical companies. Examples of BRo5 compounds include natural products and semi-
synthetic derivatives, peptidomimetics, macrocycles and degraders. However, larger molecular weight small molecules often cannot be formulated into
orally absorbed drugs and also often face solubility, potency, bioavailability and stability challenges, among others. In addition, many of the commonly
used predictive and other drug development tools are designed specifically for traditional Rule of 5 small molecule drugs rather than BRo5 molecules,
contributing to the difficulty and uncertainty of development of BRo5 compounds.
Due to their size and complexity, drug development of our BRo5 compounds may be slower and/or more expensive than drug development of traditional
“Rule of 5” compounds, resulting in program delays, increased costs or failure to obtain regulatory approval in a commercially reasonable timeframe, if at
all. Our competitors developing traditional small molecules in areas where we are developing BRo5 compounds could obtain regulatory approval and reach
the market before we do. Even if we succeed in generating an approved drug from a BRo5 compound, it may be less convenient to administer, have higher
grade and/or more frequent side effects or be more costly to manufacture and formulate than competing products on the market. The discovery and
development of BRo5 small molecules may pose risks to us such as:
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BRo5 small molecules may present difficult synthetic chemistry and manufacturing challenges, including with any scale-up of our product
candidates in sufficient quality and quantity;
BRo5 small molecules may be challenging to purify, including with any scale-up of our product candidates in sufficient quality and quantity;
BRo5 small molecules may present solubility challenges;
BRo5 small molecules may present oral absorption challenges due to low passive permeability, and may not achieve acceptable oral
bioavailability for development and may result in poor pharmaceutical properties for formulation development;
BRo5 small molecules may present cell permeability challenges, especially with regards to lipophilicity, hydrogen bond donor and rotatable
bond count, and high topological polar surface area;
BRo5 small molecules may have a propensity to be substrates for efflux proteins such as the adenosine triphosphate (ATP) binding cassette
(ABC) transporter protein family, including multidrug resistance protein 1. Cancer cells may overexpress these transporter proteins causing
an increase in expulsion of BRo5 small molecules from the cell. For example, as the site of action of our RAS(ON) inhibitors is inside the
cell, expulsion by these transporter proteins may decrease the effective concentration in the cell sufficiently to reduce target inhibition and
thereby render a RAS-dependent tumor less susceptible to the inhibitory activity of a BRo5 small molecule, such as our product candidates;
BRo5 small molecules may present central nervous system (CNS) penetration challenges due to low passive permeability and/or interaction
with efflux transporters at the blood-brain barrier and this could limit sensitivity of CNS tumors to BRo5 small molecules;
BRo5 small molecules may present formulation vehicle challenges for administration, such as intravenous and subcutaneous administration,
due to aspects such as solubility and hydrophobicity;
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BRo5 small molecules may present stability and shelf-life limitations due to the incorporation of labile functionality in their scaffolds,
including for example in the development of RMC-5552 which currently requires a cold chain storage of zero degrees Celsius; and
BRo5 small molecules may present off-target toxicities due to physico-chemical properties such as lipophilicity, which is the ability to
dissolve fats, oils and lipids, the presence of off-target pharmacophores in the molecule that can interact with other cellular proteins, or other
characteristics that have not been fully characterized within a novel chemical scaffold or platform.
These and other risks related to our research and development of BRo5 small molecules may result in delays in development, an increase in development
costs and/or the failure to develop any BRo5 small molecule to approval. As a result, our competitors may develop products more rapidly and cost
effectively than we do if they are able to target the same indications as our product candidates using conventional small molecules. In particular,
competitors may develop and commercialize a product that competes with a RAS(ON) inhibitor product candidate we may develop.
The regulatory approval processes of the FDA, the EMA and comparable foreign authorities are lengthy, time-consuming and inherently
unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.
The time required to obtain approval by the FDA, the EMA and comparable foreign authorities is unpredictable but typically takes many years following
the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition,
approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s
clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate, and it is possible that none of
our current or future product candidates will ever obtain regulatory approval.
Our current and future product candidates could fail to receive regulatory approval for many reasons, including the following:
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the FDA, the EMA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
we may be unable to demonstrate to the satisfaction of the FDA, the EMA or comparable foreign regulatory authorities that a product
candidate is safe or effective for its proposed indication or indications;
the results of clinical trials may not meet the level of statistical significance required by the FDA, the EMA or comparable foreign regulatory
authorities for approval;
we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
the FDA, the EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from clinical trials or preclinical
studies;
the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA to the FDA or
other submission or to obtain regulatory approval in the United States, the European Union (EU) or elsewhere;
the FDA, the EMA or comparable foreign regulatory authorities may find deficiencies with or fail to approve the manufacturing processes or
facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
the approval policies or regulations of the FDA, the EMA or comparable foreign regulatory authorities may significantly change in a manner
rendering our clinical data insufficient for approval.
This lengthy approval process as well as the unpredictability of clinical trial results may result in our failing to obtain regulatory approval to market any
product candidate we develop. The FDA, the EMA and other comparable foreign authorities have substantial discretion in the approval process, and
determining when or whether regulatory approval will be obtained for any of our product candidates. Even if we believe the data collected from future
clinical trials of our product candidates are promising, this data may not be sufficient to support approval by the FDA, the EMA or any other regulatory
authority.
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than
we request, may not approve the price we may desire to charge for our products, may grant approval contingent on the performance of costly post-
marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful
commercialization of that product candidate. Any of the foregoing scenarios could materially harm the prospects for our product candidates.
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Further, we have not previously submitted an NDA to the FDA, or a Marketing Authorization Application (MAA) to the EMA. We cannot be certain that
any of our programs will be successful in clinical trials or receive regulatory approval. Further, our product candidates may not receive regulatory approval
even if they are successful in clinical trials. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our
operations.
Clinical product development involves a lengthy and expensive process, with uncertain outcomes. We may experience delays in completing, or
ultimately be unable to complete, the development and commercialization of our current and future product candidates.
To obtain the requisite regulatory approvals to commercialize any of our product candidates, we must demonstrate through extensive preclinical studies and
clinical trials that our products are safe or effective in humans. Clinical testing is expensive and can take many years to complete, and its outcome is
inherently uncertain. Failure can occur at any time during the clinical trial process and our future clinical trial results may not be successful.
We may experience delays in completing our clinical trials or preclinical studies and initiating or completing additional clinical trials. We may also
experience numerous unforeseen events during our clinical trials that could delay or prevent our ability to complete these clinical trials on the timelines we
expect or otherwise delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:
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actions by regulators, institutional review boards (IRBs) or ethics committees, which may cause us or our investigators to not commence or
conduct a clinical trial at a prospective trial site or at all sites and cause us to pause or stop an in-process clinical trial;
delays in reaching, or failing to reach, agreement on acceptable terms with prospective trial sites and prospective contract research
organizations (CROs);
delays in identifying, recruiting and training suitable clinical investigators
the number of patients required for clinical trials being larger than we anticipate;
difficulty enrolling a sufficient number of patients for our clinical trials or enrollment in these clinical trials being slower than we anticipate,
including in both cases because appropriate patients must have the relevant mutations in the signaling pathways our therapies are designed to
target;
participants dropping out of these clinical trials or failing to return for post-treatment follow-up at a higher rate than we anticipate;
patients or investigators not complying with our clinical trial protocols, particularly with respect to intermittent dosing, which we are
evaluating for our product candidates;
subjects experiencing severe or serious unexpected drug-related adverse effects;
occurrence of serious adverse events in trials of the same class of agents conducted by other companies that could be considered similar to
our product candidates;
selection of clinical endpoints that require prolonged periods of clinical observation or extended analysis of the resulting data;
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or
at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or
investigators;
the supply or quality of materials for our product candidates or other materials necessary to conduct clinical trials may be insufficient or
inadequate;
lack of adequate funding to continue a clinical trial, or costs being greater than we anticipate; and
our collaborators may delay the development process by waiting to take action or focusing on other priorities.
We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or ethics committees of the institutions in which any such trial is
being conducted, by the data safety monitoring board for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a
suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our
clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical
hold, unforeseen safety issues or adverse side
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effects, failure to demonstrate a benefit from using a product, changes in government regulations or administrative actions or lack of adequate funding to
continue the clinical trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead
to the denial of marketing approval of our product candidates.
Further, conducting clinical trials in foreign countries, as we may do for our future product candidates, presents additional risks that may delay completion
of our clinical trials. These risks include the failure of enrolled subjects in foreign countries to adhere to clinical protocols as a result of differences in
healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, and political and economic
risks, including war, relevant to these foreign countries.
Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection
with their services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory
authorities. The FDA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has
created a conflict of interest or otherwise affected interpretation of the study. The FDA or comparable foreign regulatory authority may therefore question
the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay
in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead
to the denial of regulatory approval of one or more of our product candidates.
If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product
candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in
completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to
commence product sales and generate revenues. Clinical trial delays could also allow our competitors to bring products to market before we do or shorten
any periods during which we have the exclusive right to commercialize our product candidates and impair our ability to commercialize our product
candidates.
In addition, the FDA’s and other regulatory authorities’ policies with respect to clinical trials may change and additional government regulations may be
enacted. For instance, the regulatory landscape related to clinical trials in the EU recently evolved. The EU Clinical Trials Regulation (CTR), which was
adopted in April 2014 and repealed the EU Clinical Trials Directive, became applicable on January 31, 2022. While the EU Clinical Trials Directive
required a separate clinical trial application (CTA) to be submitted in each member state in which the clinical trial takes place, to both the competent
national health authority and an independent ethics committee, the CTR introduced a centralized process and only requires the submission of a single
application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each
member state, leading to a single decision per member state. The assessment procedure of the CTA has been harmonized as well, including a joint
assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own
territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved,
clinical study development may proceed. The CTR contemplates a three-year transition period. The extent to which ongoing and new clinical trials will be
governed by the CTR varies. Clinical trials for which an application was submitted (i) prior to January 31, 2022 under the EU Clinical Trials Directive, or
(ii) between January 31, 2022 and January 31, 2023 and for which the sponsor has opted for the application of the EU Clinical Trials Directive remain
governed by the EU Clinical Trials Directive until January 31, 2025. After this date, all clinical trials (including those which are ongoing) will become
subject to the provisions of the CTR. Compliance with the CTR requirements by us and our third party service providers, such as our CROs, may impact
our development plans.
The United Kingdom’s (UK) regulatory framework in relation to clinical trials is derived from existing EU legislation (as implemented into UK law,
through secondary legislation). However, in January 2022, the Medicines and Healthcare products Regulatory Agency (MHRA) launched an eight-week
consultation on reframing the UK legislation for clinical trials with the aim to streamline clinical trials approvals, enable innovation, enhance clinical trials
transparency, enable greater risk proportionality, and promote patient and public involvement in clinical trials. The UK government published its response
to the consultation in March 2023, confirming that it would bring forward changes to the legislation. These resulting legislative amendments will be closely
watched and will determine how closely the UK regulations will be aligned with the CTR. Under the terms of the Protocol on Ireland/Northern Ireland,
provisions of the (EU) CTR which relate to the manufacture and import of investigational medicinal products and auxiliary medicinal products apply in
Northern Ireland. In February 2023, the UK Government and the European Commission reached a political agreement on the “Windsor Framework” which
will revise the Protocol on Ireland/Northern Ireland in order to address some of the perceived shortcomings in its operation. Under the proposed changes,
Northern Ireland would be reintegrated under the regulatory authority of the MHRA with respect to medicinal products. The implementation of the
Windsor Framework will occur in various stages, with new arrangements relating to the supply of medicines into Northern Ireland due to take effect in
2025. A decision by the UK government not to closely align any new legislation with the new approach that has been adopted in the EU may have an effect
on the cost of conducting clinical trials in the UK as opposed to other countries in the EU.
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If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our
development plans may be impacted.
Many of the factors described above that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the
denial of regulatory approval of our product candidates or result in the development of our product candidates being stopped early.
Interim, “topline” and preliminary data from our clinical trials may differ materially from the final data.
From time to time, we may disclose interim data from our clinical trials. For example, we have reported interim Phase 1 single agent clinical data for RMC-
6236, RMC-6291, RMC-5552 and RMC-4630. In each case, this interim data included a limited number of patients and time of exposure to the study drug.
Interim data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and
more data on existing patients become available. Our clinical trial program is ongoing, and the final results may be materially different from those reflected
in any interim data we report.
From time to time, we may also publicly disclose preliminary or “topline” data from our clinical trials, which are based on a preliminary analysis of then-
available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the
particular trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had
the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same clinical trials,
or different conclusions or considerations may qualify such topline results once additional data have been received and fully evaluated. Topline data also
remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously
published. As a result, topline data should be viewed with caution until the final data are available.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may
interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the
particular product candidate or product and the value of our company in general. In addition, the information we choose to publicly disclose regarding a
particular study or clinical trial is typically a summary of extensive information, and you or others may not agree with what we determine is the material or
otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant
with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product, product candidate or our business. If the topline
data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain
approval for, and commercialize, our product candidates may be harmed.
Our current or future product candidates may cause undesirable side effects or have other properties when used alone or in combination with other
approved products or investigational new drugs that could delay or halt their clinical development, prevent their marketing approval, limit their
commercial potential or result in significant negative consequences.
Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable or clinically
unmanageable side effects could occur and cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive
label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. Any treatment-related side effects could also
affect patient recruitment or the ability of enrolled patients to complete the trial, or could result in potential product liability claims.
For example, the safety data we have released for the RMC-6236-001 and RMC-6291-001 studies included adverse events (AEs), including serious adverse
events (SAEs) and AEs that led to dose reduction.
Although our current and future product candidates will undergo safety testing to the extent possible and, where applicable, under such conditions
discussed with regulatory authorities, not all adverse effects of drugs can be predicted or anticipated.
Unforeseen side effects could arise either during clinical development or, if such side effects are rarer, following approval or commercialization after
exposure to additional patients. So far, we have not demonstrated that our product candidates are safe in humans, and we cannot predict if ongoing or future
clinical trials will do so.
Furthermore, certain of our product candidates are currently being, and may in the future be, co-administered with approved or experimental therapies.
These combinations may have additional side effects, including those that could lead us to discontinue the studies. The uncertainty resulting from the use of
our product candidates in combination with other therapies may make it difficult to accurately predict side effects in future clinical trials.
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If any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of
potentially significant negative consequences could result, including:
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regulatory authorities may withdraw their approval of the product;
we may be required to recall a product or change the way such product is administered to patients;
additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any
component thereof;
regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;
we may be required to implement a risk evaluation and mitigation strategy (REMS) or create a medication guide outlining the risks of such
side effects for distribution to patients;
we could be sued and held liable for harm caused to patients;
the product may become less competitive; and
our reputation may suffer.
Any of the foregoing events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved. In addition,
if one or more of our product candidates prove to be unsafe, our entire technology platform and pipeline could be affected.
Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain
and may prevent us or any of our existing or potential future collaboration partners from obtaining approvals for the commercialization of any product
candidate we develop.
Any current or future product candidate we may develop and the activities associated with their development and commercialization, including their
design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, and distribution, are subject to
comprehensive regulation by the FDA and other regulatory authorities in the United States and by comparable authorities in other countries. Failure to
obtain marketing approval for a product candidate will prevent us from commercializing the product candidate in a given jurisdiction. We have not received
approval to market any product candidates from regulatory authorities in any jurisdiction, and it is possible that none of our current or future product
candidates will ever obtain regulatory approval. We have no experience in submitting and supporting the applications necessary to gain marketing
approvals and expect to rely on third-party CROs or regulatory consultants to assist us in this process. Securing regulatory approval requires the submission
of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the
product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process
to, and inspection of manufacturing facilities by, the relevant regulatory authority. Any of our product candidates may not be effective, may be only
moderately effective, or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining
marketing approval or prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are
required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the product
candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or
regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. For
instance, the EU pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe
initiative, launched by the European Commission in November 2020. The European Commission’s proposal for revision of several legislative instruments
related to medicinal products was published in April 2023, and would, among other things, potentially reduce the duration of regulatory data protection and
revise the eligibility for expedited pathways. The proposed revisions remain to be agreed and adopted by the European Parliament and European Council
and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions may however have a
significant long-term impact on the biopharmaceutical industry.
The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may
decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data
obtained from preclinical and clinical testing could delay, limit, or prevent marketing approval of a product candidate. Any marketing approval we
ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
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If we experience delays in obtaining approval or if we fail to obtain approval of any current or future product candidates we may develop, the commercial
prospects for those product candidates may be harmed.
Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction does not mean that we will be
successful in obtaining marketing approval of our current and future product candidates in other jurisdictions.
Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction does not guarantee that we will be able to
obtain or maintain marketing approval in any other jurisdiction, while a failure or delay in obtaining marketing approval in one jurisdiction may have a
negative effect on the marketing approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable
regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries.
Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the
United States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory
authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be
approved for sale in that jurisdiction. In some cases, the price that we may charge for our products is also subject to approval.
We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the United States have requirements for
approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign marketing approvals and
compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction
of our products in certain countries. If we fail to comply with the regulatory requirements in international markets or receive applicable marketing
approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
Adverse events in the field of oncology or the biopharmaceutical industry could damage public perception of our current or future product candidates
and negatively affect our business.
The commercial success of our products will depend in part on public acceptance of the use of targeted cancer therapies. While a number of targeted cancer
therapies have received regulatory approval and are being commercialized, our approach to targeting cancer cells carrying tumor causing mutations,
including oncogenic RAS(ON) pathway mutations, is novel and unproven. Adverse events in clinical trials of our product candidates, or post-marketing
activities, or in clinical trials of others developing similar products or that are related to approved targeted therapies, particularly those targeting oncogenic
RAS pathway mutations, including sotorasib, and adagrasib and the resulting publicity, as well as any other adverse events in the field of oncology that
may occur in the future, could result in a decrease in demand for any product that we may develop. If public perception is influenced by claims that the use
of cancer therapies is unsafe, whether related to our therapies or those of our competitors, our products may not be accepted by the general public or the
medical community.
Future adverse events in oncology or the biopharmaceutical industry could also result in greater government regulation, stricter labeling requirements and
potential regulatory delays in the testing or approvals of our products. Any increased scrutiny could delay or increase the costs of obtaining marketing
approval for our product candidates.
Even if we receive marketing approval of a product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review,
which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience
unanticipated problems with our products, if approved.
Any marketing approvals that we receive for any current or future product candidate may be subject to limitations on the approved indicated uses for which
the product may be marketed or the conditions of approval, or contain requirements for potentially costly post-market testing and surveillance to monitor
the safety and efficacy of the product candidate. The FDA may also require REMS as a condition of approval of any product candidate, which could
include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves a product
candidate, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import and export and
record keeping for the product candidate will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of
safety and other post-marketing information and reports, registration, as well as continued compliance with current Good Manufacturing Practice (cGMP)
or similar foreign requirements and Good Clinical Practice (GCP) for any clinical trials that we conduct post-approval. Later discovery of previously
unknown problems with any approved candidate, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or
manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or product recalls;
restrictions on product distribution or use, or requirements to conduct post-marketing studies or clinical trials;
fines, untitled and warning letters, or holds on clinical trials;
refusal by the FDA or comparable foreign authorities to approve pending applications or supplements to approved applications or suspension
or revocation of approvals;
product seizure or detention, or refusal to permit the import or export of the product; and
injunctions or the imposition of civil or criminal penalties.
The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenue and could
require us to expend significant time and resources in response and could generate negative publicity.
The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay
marketing approval of a product. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new
requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained.
Even if a current or future product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians,
patients, third-party payors and others in the medical community necessary for commercial success.
If any current or future product candidate we develop receives marketing approval, whether as a single agent or in combination with other therapies, it may
nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community to be a viable product.
For example, current approved immunotherapies, and other cancer treatments like chemotherapy and radiation therapy, are well established in the medical
community, and doctors may continue to rely on these therapies. The degree of market acceptance of any product candidate, if approved for commercial
sale, will depend on a number of factors, including:
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efficacy and potential advantages compared to alternative treatments;
the ability to offer our products, if approved, for sale at competitive prices;
convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the strength of marketing and distribution support;
the ability to obtain sufficient third-party coverage and adequate reimbursement, including with respect to the use of the approved product as
a combination therapy;
adoption of a companion diagnostic and/or complementary diagnostic (if any); and
the prevalence and severity of any side effects.
The market opportunities for any current or future product candidate we develop, if and when approved, may be limited to those patients who are
ineligible for established therapies or for whom prior therapies have failed, and may be small.
Cancer therapies are sometimes characterized as first-line, second-line or third-line, and the FDA often approves new therapies initially only for third-line
use. When cancer is detected early enough, first-line therapy, usually chemotherapy, hormone therapy, surgery, radiation therapy or a combination of these,
is sometimes adequate to cure the cancer or prolong life without a cure. Second- and third-line therapies are administered to patients when prior therapy is
not effective. We expect to initially seek approval of our product candidates as a therapy for patients who have received one or more prior treatments.
Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but
there is no guarantee that our product candidates, even if approved, would be approved for first-line therapy, and, prior to any such approvals, we may have
to conduct additional clinical trials.
The number of patients who have the cancers we are targeting, including those with the necessary mutations, may turn out to be lower than expected.
Additionally, the potentially addressable patient population for our current programs or future product candidates may
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be limited, if and when approved. Even if we obtain significant market share for any product candidate, if and when approved, if the potential target
populations are small, we may never achieve commercial success without obtaining marketing approval for additional indications, including to be used as
first- or second-line therapy.
Even if we are able to commercialize any product candidates, such products may become subject to unfavorable pricing regulations or third-party
coverage and reimbursement policies, which would harm our business.
The regulations that govern marketing approvals, pricing and reimbursement for new products vary widely from country to country. Some countries require
approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing approval is granted. In
some foreign markets, prescription pharmaceutical pricing remains subject to continuing government control even after initial approval is granted. As a
result, we might obtain marketing approval for a product candidate in a particular country, but then be subject to price regulations that delay our
commercial launch of the product candidate, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of
the product candidate in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even
if our product candidates obtain marketing approval.
Our ability to commercialize any product candidates, whether as a single agent or combination therapy, successfully also will depend in part on the extent
to which coverage and reimbursement for these product candidates and related treatments will be available from government authorities, private health
insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations,
decide which medications they will pay for and establish reimbursement levels.
It is difficult to predict at this time what government authorities and third-party payors will decide with respect to coverage and reimbursement for our
programs.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, as the process is time-consuming and costly, and
coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Additionally, no
uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the United States, which may result in
coverage and reimbursement for drug products that can differ significantly from payor to payor. Moreover, eligibility for reimbursement does not imply
that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim
reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may
vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and
may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by
government healthcare programs or private payors and by any future relaxation of existing laws that restrict imports of drugs from countries where they
may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their
own reimbursement policies.
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control
costs by limiting coverage and the amount of reimbursement for particular products and requiring substitutions of generic products and/or biosimilars.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the
prices charged for drugs. We cannot be sure that coverage will be available for any product candidate that we commercialize and, if coverage is available,
the level of reimbursement. These third-party payors are also examining the cost-effectiveness of drugs in addition to their safety and efficacy.
Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If reimbursement is not
available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing
approval.
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We may fail to select or capitalize on the most scientifically, clinically and commercially promising or profitable drug candidates including mutant
RAS(ON) targets.
We have limited technical, managerial and financial resources to determine which of our potential assets, including our RAS(ON) inhibitors should be
advanced into further preclinical development, initial clinical trials, later-stage clinical development and potential commercialization. From our RAS(ON)
inhibitors, we have selected RMC-6236, our RAS(ON) multi-selective inhibitor, RMC-6291, our RAS(ON) G12C-selective inhibitor and RMC-9805,
inhibitor targeting KRAS(ON) G12D as the first candidates for clinical evaluation. In addition, we wound down EQRx’s research and development
portfolio following the EQRx Acquisition. In making these prioritization decisions and selecting development candidates from our preclinical assets, we
may make incorrect determinations. Our decisions to allocate our research and development, management and financial resources toward particular
development candidates or therapeutic areas, including our planned pivotal trials, may not lead to the development of viable commercial products and may
divert resources from better opportunities. Similarly, our decisions to delay or terminate development programs may also be incorrect and could cause us to
miss valuable opportunities.
We may not be successful in our efforts to identify or discover other product candidates and may fail to capitalize on programs or product candidates
that may present a greater commercial opportunity or for which there is a greater likelihood of success.
The success of our business depends upon our ability to identify, develop and commercialize product candidates. Research programs to identify new
product candidates require substantial technical, financial and human resources, and we may fail to identify potential product candidates for numerous
reasons.
Additionally, because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for
indications that later prove to have greater commercial potential. However, the advancement of this product candidate may ultimately prove to be
unsuccessful or less successful than another program in our pipeline that we might have chosen to pursue on a less aggressive basis. Our estimates
regarding the potential market for our product candidates could be inaccurate, and our spending on current and future research and development programs
may not yield any commercially viable products. If we do not accurately evaluate the commercial potential for a particular product candidate, we may
relinquish valuable rights to that product candidate through collaboration, licensing or other arrangements in cases in which it would have been more
advantageous for us to retain sole development and commercialization rights to such product candidate. Alternatively, we may allocate internal resources to
a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.
If any of these events occur, we may be forced to abandon or delay our development efforts with respect to a particular product candidate or fail to develop
a potentially successful product candidate.
We may need to use existing commercial diagnostic tests or develop, or enter into a collaboration or partnership to develop, novel complementary
diagnostics and/or novel companion diagnostics for some of our current or future product candidates. If we or our future partners are unable to
successfully develop these companion diagnostics or complementary diagnostics, or experience significant delays in doing so, we may not realize the
full commercial potential of our future product candidates.
As one of the key elements of our product development strategy, we seek to identify cancer patient populations that may derive meaningful benefit from
our current or future product candidates. Because predictive biomarkers may be used to identify the right patients for our programs and our current or
future product candidates, we believe that our success may depend, in part, on our ability to use existing diagnostic tests from third parties or develop novel
complementary diagnostics and/or novel companion diagnostics in collaboration with partners.
In the event that novel tests will need to be developed, we have little experience in the development of diagnostics. As such, we expect to rely on future
partners in developing appropriate diagnostics to pair with our current or future product candidates. We may be unsuccessful in entering into collaborations
for the development of companion diagnostics for our programs and our current or future product candidates.
Complementary diagnostics and/or companion diagnostics are subject to regulation by the FDA and similar regulatory authorities outside the United States
as medical devices and require separate regulatory approval, clearance or certification prior to commercialization. In addition, according to FDA guidance,
if the FDA determines that a companion diagnostic device is essential to the safe and effective use of a novel therapeutic product or indication, the FDA
generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic is not also approved or cleared for that
indication. Companion diagnostics are developed in conjunction with clinical programs for the associated therapeutic product, and the FDA has generally
required premarket approval of companion diagnostics for cancer therapies. The approval or clearance of a companion diagnostic as part of the therapeutic
product’s further labeling limits the use of the therapeutic product to only those patients who express the specific characteristic, such as a biomarker, that
the companion diagnostic was developed to
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detect.
If we, our partners, or any third parties that we engage to assist us, are unable to successfully develop complementary diagnostics and/or companion
diagnostics for our product candidates and any future product candidates, or experience delays in doing so:
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the development of our product candidates and any other future product candidates may be adversely affected if we are unable to
appropriately select patients for enrollment in our clinical trials
we may be unable to obtain approval for any of our product candidates for which the FDA or foreign regulatory authority have determined a
companion diagnostic is required; and
we may not realize the full commercial potential of our product candidates and any other future product candidates that receive marketing
approval if, among other reasons, we are unable to appropriately identify, or it takes us longer to identify, patients who are likely to benefit
from therapy with our products, if approved.
We may seek and fail to obtain fast track or breakthrough therapy designations for our current or future product candidates. If we are successful, these
programs may not lead to a faster development or regulatory review process, and they do not guarantee we will receive approval for any product
candidate.
If a product is intended for the treatment of a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address an
unmet medical need for this condition, the product sponsor may apply for fast track designation. Specifically, drugs are eligible for fast track designation if
they are intended, alone or in combination with one or more drugs or biologics, to treat a serious or life-threatening disease or condition and demonstrate
the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product candidate and the
specific indication for which it is being studied. The sponsor of a fast track product candidate has opportunities for more frequent interactions with the
applicable FDA review team during product development and, once an NDA is submitted, the application may be eligible for priority review. An NDA
submitted for a fast track product candidate may also be eligible for rolling review, where the FDA may consider for review sections of the NDA on a
rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees
to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first
section of the application.
The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular product candidate is eligible for this designation,
the FDA may reach a different conclusion and not grant it. Even if we do receive fast track designation, we may not experience a faster development
process, review or approval compared to conventional FDA procedures. The FDA may rescind any fast track designation if it believes that the designation
is no longer supported by data from our clinical development program.
We may also seek breakthrough therapy designation for our product candidates. A breakthrough therapy is defined as a drug that is intended, alone or in
combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the
drug may demonstrate substantial improvement over currently existing therapies on one or more clinically significant endpoints, such as substantial
treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough therapies, increased interaction
and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the
number of patients placed in ineffective control regimens. Drugs and biologics designated as breakthrough therapies also receive the same benefits
associated with fast track designation, including eligibility for rolling review of a submitted NDA, if the relevant criteria are met. Like fast track
designation, breakthrough therapy designation is within the discretion of the FDA. Accordingly, even if we believe a product candidate we develop meets
the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt
of breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs
considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if a product candidate we
develop qualifies as a breakthrough therapy, the FDA may later decide that the drug no longer meets the conditions for qualification and rescind the
designation.
Jurisdictions where we may seek to pursue product candidates outside of the United States have processes similar to the breakthrough designation and fast
track processes described above, and to the extent we desire to enter these markets, we will face similar risks and challenges as those described in the
United States.
We may attempt to secure approval from the FDA through the use of the accelerated approval pathway. If we are unable to obtain this approval, we
may be required to conduct additional preclinical studies or clinical trials beyond those that we contemplate, which could increase the expense of
obtaining, and delay the receipt of, necessary regulatory approvals. Even if we receive accelerated approval from the FDA, if our confirmatory trials do
not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw any accelerated approval
we have obtained.
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We may in the future seek accelerated approval for one or more of our product candidates. Under the accelerated approval program, the FDA may grant
accelerated approval to a product candidate designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over
available therapies upon a determination that the product candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably
likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a
given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory
measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit.
An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably
likely to predict an effect on irreversible morbidity or mortality or other clinical benefit.
The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic
advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on
the sponsor’s agreement to conduct, in a diligent manner, additional confirmatory studies to verify and describe the drug’s clinical benefit. If such post-
approval studies fail to confirm the drug’s clinical benefit or are not completed in a timely manner, the FDA may withdraw its approval of the drug on an
expedited basis. In addition, in December 2022, President Biden signed an omnibus appropriations bill to fund the U.S. government through fiscal year
2023. The omnibus bill included the Food and Drug Omnibus Reform Act of 2022, which, among other things, provided FDA new statutory authority to
mitigate potential risks to patients from continued marketing of ineffective drugs previously granted accelerated approval. Under these provisions, the FDA
may require a sponsor of a product seeking accelerated approval to have a confirmatory trial underway prior to such approval being granted.
Prior to seeking accelerated approval for any of our product candidates, we intend to seek feedback from the FDA and will otherwise evaluate our ability to
seek and receive accelerated approval. There can be no assurance that after our evaluation of the feedback and other factors we will decide to pursue or
submit an NDA for accelerated approval or any other form of expedited development, review or approval. Furthermore, if we decide to submit an
application for accelerated approval for our product candidates, there can be no assurance that such application will be accepted or that any expedited
development, review or approval will be granted on a timely basis, or at all. The FDA or other comparable foreign regulatory authorities could also require
us to conduct further studies prior to considering our application or granting approval of any type. A failure to obtain accelerated approval or any other
form of expedited development, review or approval for our product candidate would result in a longer time period to commercialization of such product
candidate, if any, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.
We may seek orphan drug designation for our product candidates, and we may be unsuccessful or may be unable to maintain the benefits associated
with orphan drug designation, including the potential for market exclusivity.
As part of our business strategy, we may seek orphan drug designation for our product candidates. Regulatory authorities in some jurisdictions, including
the United States, may designate drugs for relatively small patient populations as orphan drugs or, in the EU, orphan medicinal products. Under the Orphan
Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a
patient population of fewer than 200,000 individuals annually in the United States, or a patient population greater than 200,000 in the United States where
there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the United States, orphan drug
designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers.
Similarly, in the EU, the European Commission grants orphan medicinal product designation after receiving the opinion of the EMA Committee for Orphan
Medicinal Products on an orphan medicinal product designation application. Orphan medicinal product designation is intended to promote the development
of medicines (1) that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions where (2) either (i)
such conditions affect no more than 5 in 10,000 persons in the EU when the application is made, or (ii) the product, without the benefits derived from
orphan status, would not generate sufficient return in the EU to justify investment; and (3) for which no satisfactory method of diagnosis, prevention, or
treatment has been authorized (or if such method exists, the product would be a significant benefit to those affected). In the EU, orphan designation entitles
a party to a number of incentives, such as protocol assistance and scientific advice specifically for designated orphan medicines, and potential fee
reductions depending on the status of the sponsor.
Generally, if a drug with an orphan drug designation subsequently receives the first marketing approval for the disease or condition for which it has such
designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA or foreign authorities from approving another marketing
application for the same drug for the same disease or condition for that time period, except in limited circumstances. The applicable period is seven years in
the United States and ten years in the EU. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug
designation or if the drug is sufficiently profitable such that market exclusivity is no longer justified.
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We may be unsuccessful in obtaining orphan drug designation for our product candidates. In addition, even if we obtain orphan drug exclusivity for a
product candidate, that exclusivity may not effectively protect the product candidate from competition because different therapies can be approved for the
same disease or condition. Even after an orphan drug is approved, the FDA or comparable foreign authorities can subsequently approve the same drug for
the same disease or condition if the FDA or comparable foreign authorities conclude that the later drug is clinically superior in that it is shown to be safer,
more effective or makes a major contribution to patient care. In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved
for a use that is broader than the disease or condition for which it received orphan designation. Moreover, orphan drug exclusive marketing rights in the
United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure
sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. Orphan drug designation neither shortens the development
time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. While we may seek orphan drug
designation for applicable indications for our current and any future product candidates, we may never receive such designations. Even if we do receive
such designations, there is no guarantee that we will enjoy the benefits of those designations, including marketing exclusivity.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of any approved
products.
We face an inherent risk of product liability as a result of the clinical testing of product candidates and will face an even greater risk if we commercialize
any products. For example, we may be sued if any product candidate we develop causes or is perceived to cause injury or is found to be otherwise
unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing,
defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted
under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be
required to limit commercialization of any approved products. Even successful defense would require significant financial and management resources.
Regardless of the merits or eventual outcome, liability claims may result in:
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decreased demand for any approved product;
injury to our reputation;
withdrawal of clinical trial participants;
initiation of investigations by regulators;
costs to defend the related litigation;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
exhaustion of any available insurance and our capital resources and potential increase in our insurance premiums and/or retention amounts;
and
the inability to commercialize any product candidate.
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit
the commercialization of products we develop, alone or with collaboration partners.
Insurance coverage is increasingly expensive. We may not be able to maintain insurance at a reasonable cost or in an amount adequate to satisfy any
liability that may arise, if at all. Our insurance policy contains various exclusions, and we may be subject to a product liability claim for which we have no
coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by
our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any current or future
collaborator entitle us to indemnification against losses, such indemnification is limited and may not be available or adequate should any claim arise.
The ongoing armed conflicts between Russia and Ukraine and Israel and Hamas and resulting actions could adversely affect our business, financial
condition and results of operations.
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In February 2022, Russian military forces launched a military action in Ukraine, and sustained conflict and disruption in the region is likely. The length,
impact, scope and outcome of this ongoing military conflict is highly unpredictable and could lead to significant market and other disruptions, including
significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social
instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, as well as an increase in cyberattacks and espionage.
Russia’s recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to
substantial expansion of sanction programs imposed by the United States, the European Union, the UK, Canada, Switzerland, Japan, and other countries
against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including,
among others:
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blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the
Society for Worldwide Interbank Financial Telecommunication payment system) and certain Russian businesses, some of which have
significant financial and trade ties to the European Union;
blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians and those with government
connections or involved in Russian military activities; and
blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on
investments and access to capital markets, and bans on various Russian imports.
In retaliation against new international sanctions and as part of measures to stabilize and support the volatile Russian financial and currency markets, the
Russian authorities also imposed significant currency control measures aimed at restricting the outflow of foreign currency and capital from Russia,
imposed various restrictions on transacting with non-Russian parties, banned exports of various products, and imposed other economic and financial
restrictions. Additional sanctions by Russia on the one hand, and by the other countries on the other hand, could adversely affect the global economy and
financial markets and could adversely affect our business, financial condition, and results of operations. In addition, it is possible that the conflict could
expand beyond its current scope and involve additional countries and regions.
Separately, in October 2023, the Hamas organization launched a series of coordinated attacks from the Gaza Strip onto Israel and thereafter Israel declared
war on Hamas. The resulting armed conflict is ongoing and hostilities between Israel and Hamas could escalate and involve surrounding countries in the
Middle East or beyond. Furthermore, following Hamas’s attack on Israel, the Houthi movement, which controls parts of Yemen, launched a number of
attacks on marine vessels in the Red Sea. The Red Sea is an important maritime route for international trade. As a result of such disruptions, we may
experience supply disruptions or other effects.
We are actively monitoring the situation in Ukraine and Russia and the conflict between Israel and Hamas and assessing its impact on our business,
including our current and planned clinical operations, and our business partners and suppliers. Although we have not experienced material interruptions in
our infrastructure, supplies, technology systems, or networks needed to support our operations, this conflict may limit our ability to include European or
Middle Eastern sites as clinical trial locations in the future, and we may have to delay, reduce the scope of or suspend one or more of our clinical trials.
We cannot predict the progress or outcome of the military conflict in Ukraine, whether it will expand or its impacts in Ukraine, Russia, Europe, the United
States or the rest of the world, or of the conflict in the Israel-Gaza regions and any potential increases in hostilities in the Middle East. The extent and
duration of the military action, sanctions, and resulting market disruptions could be significant and could potentially have substantial impact on the global
economy and our business for an unknown period of time. Any such disruption may also magnify the impact of other risks described in Item 1A.
Healthcare legislative reform measures may significantly impact our business and results of operations.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the
Patient Protection and Affordable Care Act (the ACA) was passed, which substantially changes the way healthcare is financed by both government and
private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, increases the minimum Medicaid rebates owed
by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care
organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs, and creates a new Medicare Part D coverage gap
discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
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Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. In June 2021, the U.S. Supreme Court
dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to
the Supreme Court’s decision, President Biden issued an executive order initiating a special enrollment period from February 15, 2021 through August 15,
2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies
to review and reconsider their existing policies and rules that limit access to healthcare.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In March 2021, the American Rescue Plan Act
of 2021 was signed into law, which eliminated the statutory cap on the Medicaid drug rebate, beginning January 1, 2024. The rebate was previously capped
at 100% of a drug’s average manufacturer price (AMP).
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. Most recently, in August 2022, the
Inflation Reduction Act of 2022 (IRA) was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price
negotiations with Medicare beginning in 2026, with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare
Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting
program (beginning in 2025). The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these
provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are
implemented. In August 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price
negotiation program is currently subject to legal challenges. For that and other reasons, it is currently unclear how the IRA will be effectuated, and the
impact of the IRA on our business and the pharmaceutical industry cannot yet be fully determined.
In addition, in response to the Biden administration’s October 2022 executive order, in February 2023, HHS released a report outlining three new models
for testing by the Center for Medicare and Medicaid Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility,
and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future. We expect that additional state
and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for
healthcare products and services, which could result in reduced demand for any product candidate we develop or complementary diagnostics or companion
diagnostics or additional pricing pressures.
Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.
Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other
things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
In addition, FDA regulations and guidance may be revised or reinterpreted by the FDA in ways that may significantly affect our business. Any new
regulations or guidance, or revisions or reinterpretations of existing regulations or guidance, may impose additional costs or lengthen FDA review times for
our product candidates. We cannot determine how changes in regulations, statutes, policies, or interpretations when and if issued, enacted or adopted, may
affect our business in the future.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and
retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise
prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our
business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability
to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have
fluctuated in recent years as a result.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government
agencies, which would adversely affect our business. For example, over the last several years the U.S. government has shut down several times and certain
regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities. Separately, in
response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points. Even though
the FDA has since resumed standard inspection operations, any resurgence of the virus or emergence of new variants may lead to further inspectional or
administrative delays. If a prolonged government shutdown occurs or FDA experiences other delays, it could significantly impact the ability of the FDA to
timely review and process our regulatory submissions.
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We are subject to stringent privacy laws, information security policies and contractual obligations governing the use, processing and transfer of
personal information.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous federal, state and foreign laws, requirements and
regulations governing the collection, use, disclosure, retention, and security of personal information, such as information that we may collect in connection
with clinical trials in the United States and abroad. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable
future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This
evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal
information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of
compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with
federal, state or foreign laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could
result in negative publicity, government investigations and enforcement actions, or claims by third parties and damage to our reputation.
As our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and face increased
scrutiny or attention from regulatory authorities. In the United States, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposes,
among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information. We
may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and
security requirements under HIPAA. Depending on the facts and circumstances, we could be subject to significant penalties if we violate HIPAA.
Further, various states have implemented certain data privacy and security laws and regulations that impose restrictive requirements regulating the use and
disclosure of health-related and other personal information. For example, the California Consumer Privacy Act, as amended by the California Privacy
Rights Act (collectively, CCPA) requires certain businesses that process personal information of California residents to, among other things: provide certain
disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; receive and respond to requests
from California residents to access, delete, and correct their personal information, or to opt-out of certain disclosures of their personal information; and
enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf. Similar laws
have been passed in other states, and are continuing to be proposed at the state and the federal level, reflecting a trend toward more stringent privacy
legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In
the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to
comply with the requirements of these laws could adversely affect our financial condition.
State laws and regulations are not necessarily preempted by federal laws and regulations, such as HIPAA, particularly if a state affords greater protection to
individuals than federal law. Where state laws are more protective, we have to comply with the stricter provisions. In addition to fines and penalties
imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been
misused. The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance
issues for us and data we receive, use and share, potentially exposing us to additional expense, adverse publicity and liability. Legal requirements relating
to the collection, storage, handling, and transfer of personal information and personal data continue to evolve and may result in increased public scrutiny
and escalating levels of enforcement, sanctions and increased costs of compliance.
The processing of personal data in the European Economic Area (EEA) is governed by the General Data Protection Regulation (GDPR). The GDPR
imposes stringent requirements for controllers and processors of personal data. The GDPR applies extraterritorially, and we may be subject to the GDPR
because of our data processing activities that involve the personal data of individuals located in the EEA, or in the context of our activities within the EEA,
such as in connection with any EEA clinical trials. The GDPR may impose additional obligations and liability in relation to the personal data that we
process, and we may be required to put in place additional mechanisms to ensure compliance with its requirements. This may be onerous and may interrupt
or delay our development activities. If we or our vendors fail to comply with the GDPR and the applicable national data protection laws of the EEA
member states, or if regulators assert we have failed to comply with these laws, it may lead to regulatory enforcement actions, which can result in, among
other things, monetary penalties of up to €20,000,000 or up to 4% of the total worldwide annual turnover of the noncompliant undertaking for the
preceding financial year, whichever is higher, and other administrative penalties. The GDPR also imposes strict rules on the transfer of personal data out of
the EEA to the United States and other third countries that have not been found to provide adequate protection to such personal data, and the efficacy and
longevity of current transfer mechanisms between the EEA and the United States remains uncertain. Case law from the Court of Justice of the European
Union (CJEU) states that reliance on the standard contractual clauses – a standard form of contract approved by the European Commission as an adequate
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personal data transfer mechanism – alone may not necessarily be sufficient in all circumstances, and that transfers must be assessed on a case-by-case basis.
The European Commission adopted its Adequacy Decision in relation to the EU-U.S. Data Privacy Framework (DPF) in July 2023, rendering the DPF
effective as a GDPR transfer mechanism to U.S. entities self-certified under the DPF. We currently rely in part on the EU standard contractual clauses and
the UK Addendum to the EU standard contractual clauses, as relevant, to transfer personal data outside the EEA and the UK, including to the U.S. We
expect the existing legal complexity and uncertainty regarding international personal data transfers to continue. In particular, we expect the DPF Adequacy
Decision to be challenged and international transfers to the U.S. and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by
regulators. As a result, we may have to make certain operational changes, and we will have to implement revised standard contractual clauses and other
relevant documentation for existing data transfers within required timeframes.
We must also comply with the UK General Data Protection Regulation, which together with the UK Data Protection Act 2018, retains the GDPR in UK
national law (collectively, the UK GDPR). The UK GDPR mirrors the fines under the GDPR, i.e. fines up to the greater of £17.5 million or 4% of global
turnover of a noncompliant undertaking’s global annual revenue for the preceding financial year. On October 12, 2023, the UK Extension to the DPF came
into effect (as approved by the UK Government), as a data transfer mechanism from the UK to U.S. entities self-certified under the DPF. We may incur
liabilities, expenses, costs and other operational losses under the GDPR and privacy laws of the applicable EU and EEA Member States and the UK in
connection with any measures we take to comply with them. As we continue to expand into other foreign countries and jurisdictions, we may also be
subject to additional laws and regulations that may affect how we conduct business.
Compliance with U.S. and international data protection laws and regulations could cause us to incur substantial costs or require us to change our business
practices and compliance procedures in a manner adverse to our business. Penalties for violations of these laws vary and may be significant. Moreover,
complying with these various laws could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose
data, or in some cases, impact our ability to operate in certain jurisdictions. In addition, we rely on third-party vendors to collect, process and store data on
our behalf and we cannot guarantee that such vendors are in compliance with all applicable data protection laws and regulations. Our or our vendors’
failure to comply with U.S. and international data protection laws and regulations could result in government investigations and enforcement actions
(which could include civil or criminal penalties), private litigation and adverse publicity. Claims that we have violated individuals’ privacy rights, failed to
comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to
defend and could result in adverse publicity.
Our business and operations, or those of our CROs or third parties, may suffer in the event of information technology system failures, cyberattacks or
deficiencies in our cybersecurity, which could materially affect our business, results of operations and financial condition.
We receive, generate and store significant and increasing volumes of sensitive information, such as health-related information, clinical trial data,
proprietary business information and the personal information of our employees and contractors (collectively, Confidential Information). We face a number
of risks relative to protecting the information technology systems we rely on and this Confidential Information, including loss of access risk, inappropriate
use or disclosure, inappropriate modification and the risk of our being unable to adequately monitor, audit and modify our controls over our Confidential
Information. This risk extends to the information technology systems and information of any collaboration partners, medical institutions, clinical
investigators, CROs, contract laboratories, or other third parties involved in our business. There can be no assurance that our cybersecurity risk
management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our
systems and Confidential Information.
Despite the implementation of security measures, our information technology systems, as well as those of CROs or other third parties with which we have
relationships, are vulnerable to attack, interruption and damage from computer viruses and malware (e.g., ransomware), malicious code, misconfigurations,
“bugs” or other vulnerabilities, unauthorized access, natural and manmade disasters, terrorism, war and telecommunication and electrical failures,
malfeasance by external or internal parties, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors and
human error (e.g., social engineering, phishing). Attacks upon information technology systems are increasing in their frequency, levels of persistence,
sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.
Furthermore, because the technologies used to obtain unauthorized access to, or to sabotage or disrupt, systems change frequently and often are not
recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also
experience security breaches that may remain undetected for an extended period. We may not be able to anticipate all types of security threats, and, even if
identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are
designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. We may also face increased cybersecurity risks due to
our reliance on internet technology and
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the number of our and our service providers’ employees who are (and may continue to be) working remotely, which may create additional opportunities for
cybercriminals to exploit vulnerabilities. The White House, the Securities and Exchange Commission (the SEC) and other regulators have also increased
their focus on companies’ cybersecurity vulnerabilities and risks.
We, our CROs and certain of our service providers are, from time to time, subject to cyberattacks and security incidents. While we have not to our
knowledge experienced any significant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our or
our critical third parties’ operations, it could result in delays and/or material disruptions of our research and development programs, our operations and
ultimately, our financial results. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our
regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for the manufacture of
our product candidates and to conduct clinical trials, and similar events relating to their information technology systems could also adversely impact our
business. Further, due to the current political uncertainty involving Russia and Ukraine, there is an increased likelihood that the tensions could result in
cyberattacks or cybersecurity incidents that could either directly or indirectly impact our or our critical third parties’ operations. To the extent that any
disruption or security breach were to result in a loss of or damage to data or applications, or inappropriate disclosure of Confidential Information, the costs
associated with the investigation, remediation and potential notification of the breach to counter-parties and data subjects could be material, we could incur
liability due to delays in the development and commercialization of our product candidates or other business activities, and/ we may be exposed to
reputational harm, litigation, regulatory investigations and enforcement, fines and penalties, or increased costs of compliance and system remediation.
Our existing general liability and cyber liability insurance policies may not cover, or may cover only a portion of, any potential claims related to security
breaches to which we are exposed or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed. We also cannot be
certain that our existing insurance coverage will continue to be available on acceptable terms or in amounts sufficient to cover the potentially significant
losses that may result from a security incident or breach or that the insurer will not deny coverage of any future claim. If the information technology
systems of our CROs or other service providers fail, or become subject to disruptions or security breaches, we may have insufficient recourse against such
third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent
future events of this nature from occurring.
Risks related to reliance on third parties
We may depend on collaborations with other third parties for the development and commercialization of our product candidates in the future. If our
collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.
In the future, we may form or seek other strategic alliances, joint ventures, or collaborations, or enter into additional licensing arrangements with third
parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates.
Collaborations involving our current and future product candidates, including our collaboration with Amgen, may pose the following risks to us:
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collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations and may have
incentives that are different than ours;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial, abandon a product
candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or
product candidates;
a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or
otherwise not perform satisfactorily in carrying out these activities;
collaborators may not properly prosecute, maintain, enforce or defend our intellectual property rights or may use our proprietary information
in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary
information or expose us to potential litigation, or other intellectual property proceedings;
collaborators may own or co-own intellectual property covering products that result from our collaboration with them, and in such cases, we
may not have the exclusive right to develop, license or commercialize this intellectual property;
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disputes may arise with respect to ownership of any intellectual property developed pursuant to our collaborations;
disputes may arise between a collaborator and us that cause the delay or termination of the research, development or commercialization of the
product candidate, or that result in costly litigation or arbitration that diverts management attention and resources; and
if a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product
development or commercialization program under such collaboration could be delayed, diminished or terminated, including if the partner in
such a business combination has products that compete with ours.
As a result, if we enter into additional collaboration agreements and strategic partnerships or license our intellectual property, products or businesses, we
may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations, which could delay
our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the
revenue or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related to
any product candidate we develop could delay the development and commercialization of our product candidates, which would harm our business
prospects, financial condition, and results of operations.
We may seek to establish additional collaborations, and, if we are not able to establish them on commercially reasonable terms, we may have to alter
our development and commercialization plans.
The advancement of our product candidates and development programs and the potential commercialization of our current and future product candidates
will require substantial additional cash to fund expenses. For some of our programs, we may decide to collaborate with additional pharmaceutical and
biotechnology companies with respect to development and potential commercialization. Any of these relationships may require us to incur non-recurring
and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and
business.
We face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Whether we reach a
definitive agreement for other collaborations will depend upon, among other things, our assessment of the collaborator’s resources and expertise, the terms
and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or
results of clinical trials, the progress of our clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States,
the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the
potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such
ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative
product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive
than the one with us for our product candidate. Further, we may not be successful in our efforts to establish a strategic partnership or other alternative
arrangements for future product candidates because they may be deemed to be at too early of a stage of development for collaborative effort, and third
parties may not view them as having the requisite potential to demonstrate safety and efficacy.
The terms of any collaboration agreement we enter into may restrict us from entering into future agreements on certain terms with potential collaborators,
which may limit our ability to find additional collaborators in the future or adversely impact the terms of these future collaborations.
In addition, business combinations among large pharmaceutical companies have in the past and may in the future result in a reduced number of potential
future collaborators.
We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the
development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other
development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and
undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or
commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do
not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.
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If conflicts arise between us and our collaborators or strategic partners, these parties may act in a manner adverse to us and could limit our ability to
implement our strategies.
If conflicts arise between our corporate or academic collaborators or strategic partners and us, the other party may act in a manner adverse to us and could
limit our ability to implement our strategies. Sanofi, Amgen or future collaborators or strategic partners may develop, either alone or with others, products
in related fields that are competitive with the products or potential products that are the subject of these collaborations. Competing products, either
developed by the collaborators or strategic partners or to which the collaborators or strategic partners have rights, may result in the withdrawal of partner
support for our product candidates. Our current or future collaborators or strategic partners may preclude us from entering into collaborations with their
competitors, fail to obtain timely regulatory approvals, terminate their agreements with us prematurely, or fail to devote sufficient resources to the
development and commercialization of products. Any of these developments could harm our product development efforts.
We rely on third parties to conduct the clinical trials for our product candidates. If these third parties do not successfully carry out their contractual
duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain marketing approval for or commercialize our
product candidates.
We do not have the ability to independently conduct clinical trials. We and any collaboration partners who may conduct clinical trials involving our product
candidates rely on medical institutions, clinical investigators, CROs, contract laboratories, and other third parties to conduct or otherwise support these
clinical trials, all of which we refer to herein as our clinical trials. We and our collaborators rely heavily on these parties for execution of clinical trials and
control only certain aspects of their activities. In addition, we have limited control over the activities of our collaborators who may conduct clinical trials
involving our product candidates. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the
applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on third parties does not relieve us of our regulatory
responsibilities. For any violations of laws and regulations during the conduct of our clinical trials, we could be subject to untitled and warning letters or
enforcement action that may include civil penalties or criminal prosecution.
We, our collaborators and the other third parties involved in our clinical trials are required to comply with regulations and requirements, including GCP, for
conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and
that the trial patients are adequately informed of the potential risks of participating in clinical trials and their rights are protected. These regulations are
enforced by the FDA, the competent authorities of the EU member states and comparable foreign regulatory authorities for any drugs in clinical
development. The FDA and comparable foreign regulatory authorities enforce GCP requirements through periodic inspections of clinical trial sponsors,
principal investigators and trial sites. If we, our collaborators or other third parties fail to comply with applicable GCP, the clinical data generated in our
clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials
before approving our marketing applications. Upon inspection, the FDA or comparable foreign authorities may determine that any of our current or future
clinical trials do not comply with GCP. In addition, our clinical trials must be conducted with product candidates produced under cGMP regulations and
similar regulatory requirements outside the United States. Our failure or the failure of third parties to comply with these regulations may require us to
repeat clinical trials, which would delay the marketing approval process and could also subject us to enforcement action. We also are required to register
certain ongoing clinical trials and provide certain information, including information relating to the trial’s protocol, on a United States government-
sponsored database, ClinicalTrials.gov, within specific timeframes. Similar disclosure requirements may exist in foreign jurisdictions. Failure to do so can
result in fines, adverse publicity and civil and criminal sanctions.
We have participated and in the future may participate in clinical collaborations where a partner is responsible for the conduct of a clinical trial involving
our product candidates. These collaborators may be commercial entities, such as Amgen’s Phase 1b trial evaluating the combination of RMC-4630 and the
KRAS(OFF) G12C inhibitor sotorasib in Amgen’s CodeBreaK 101c study, Sanofi’s Phase 1/2 trial evaluating the combination of RMC-4630 and Merck’s
PD-1 inhibitor pembrolizumab and the Phase 1/2 study of RMC-4630 in combination with Mirati Therapeutics’ KRAS(OFF) G12C inhibitor, adagrasib, or
investigator-sponsored or initiated studies that use our product candidates, such as the Netherlands Cancer Institute's study of the combination of RMC-
4630 with Eli Lilly’s investigational ERK inhibitor (LY3214996) and UCSF’s Phase 1/1b trial of RMC-5552. Although we intend to design the clinical
trials for our product candidates, or be involved in the design when other parties sponsor the trials, because these collaborators will have primary
responsibility for the conduct of these trials, many important aspects of our clinical development for these trials, including their conduct and timing, is
outside of our direct control.
Our reliance on third parties to conduct future clinical trials will also result in less direct control over the management of data developed through clinical
trials than would be the case if we were relying entirely upon our own staff. Communicating with third parties can also be challenging, potentially leading
to mistakes as well as difficulties in coordinating activities. Third parties may:
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have staffing difficulties;
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fail to comply with contractual obligations;
experience regulatory compliance issues;
have incentives that are different than ours;
undergo changes in priorities or become financially distressed; or
form relationships with other entities, some of which may be our competitors.
These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us to unexpected cost
increases that are beyond our control. If the CROs or other third parties involved in our clinical trials do not perform these trials in a satisfactory manner,
breach their obligations to us or our collaborators or fail to comply with regulatory requirements, the development, marketing approval and
commercialization of our product candidates may be delayed, we may not be able to obtain marketing approval and commercialize our product candidates,
or our development program may be materially and irreversibly harmed. If we are unable to rely on clinical data collected by third parties involved in our
clinical trials, we could be required to repeat, extend the duration of, or increase the size of our clinical trials and this could significantly delay
commercialization and require significantly greater expenditures.
If any of our relationships with our CROs or other third parties involved in our clinical trials terminate, we may not be able to enter into arrangements with
alternative CROs or other third parties on commercially reasonable terms, or at all. If CROs or other third parties do not successfully carry out their
contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain are
compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical trials such CROs or other third
parties are associated with may be extended, delayed or terminated, and we may not be able to obtain marketing approval for or successfully commercialize
our product candidates.
We rely on third parties to manufacture preclinical and clinical drug supplies, and we intend to rely on third parties to produce commercial supplies of
any approved product, which increases the risk that we will not have sufficient quantities of these product candidates or products or such quantities at
an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not own or operate manufacturing facilities for the production of preclinical, clinical or commercial supplies of the product candidates that we are
developing or evaluating in our development programs. We have limited personnel with experience in drug manufacturing and lack the resources and the
capabilities to manufacture any of our product candidates on a preclinical, clinical or commercial scale. We rely on third parties for supply of our
preclinical and clinical drug supplies (including key starting and intermediate materials), and our strategy is to outsource all manufacturing of our product
candidates and products to third parties.
In order to conduct clinical trials of product candidates, we will need to have them manufactured in potentially large quantities. Our third-party
manufacturers may be unable to successfully increase the manufacturing capacity for any of our clinical drug supplies (including key starting and
intermediate materials) in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities and at any other time.
For example, ongoing data on the stability of our product candidates may shorten the expiry of our product candidates and lead to clinical trial material
supply shortages, and potentially clinical trial delays. If these third-party manufacturers are unable to successfully scale up the manufacture of our product
candidates in sufficient quality and quantity, the development, testing and clinical trials of that product candidate may be delayed or infeasible, and
regulatory approval or commercial launch of that product candidate may be delayed or not obtained.
Some of our third-party suppliers are currently our sole source of drug supplies (including key starting and intermediate materials) and as a result an issue
with one of these suppliers may impact our development or commercial plans. Our use of new third-party manufacturers or suppliers increases the risk of
delays in production or insufficient supplies of our product candidates (and the key starting and intermediate materials for such product candidates) as we
transfer our manufacturing technology to these manufacturers or suppliers and as they gain experience manufacturing or producing our product candidates
(and the key starting and intermediate materials for these product candidates).
Even after a third-party manufacturer has gained significant experience in manufacturing our product candidates (or the key starting and intermediate
materials for such product candidates), or even if we believe we have succeeded in optimizing the manufacturing process, there can be no assurance that
such manufacturer will produce sufficient quantities of our product candidates (or the key starting and intermediate materials for such product candidates)
in a timely manner or continuously over time, or at all.
We may be delayed if we need to change the manufacturing process used by a third party. Further, if we change an approved manufacturing process, then
we may be delayed if the FDA or a comparable foreign authority needs to review the new manufacturing process before it may be used.
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We do not currently have any agreements with third-party manufacturers for long-term commercial supply. In the future, we may be unable to enter into
agreements with third-party manufacturers for commercial supplies of any of our product candidates, or may be unable to do so on acceptable terms. Even
if we are able to establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails risks, including:
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reliance on the third party for regulatory compliance and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
the possible termination or non-renewal of the agreement by the third party at a time that is costly or inconvenient for us.
Third-party manufacturers may not be able to comply with cGMP requirements or similar regulatory requirements outside the United States. Our failure, or
the failure of our third-party manufacturers, to comply with applicable requirements could result in sanctions being imposed on us, including fines,
injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products,
operating restrictions and/or criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.
Our future product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing
facilities. There are a limited number of manufacturers that operate under cGMP requirements particularly for the development of monoclonal antibodies,
and that might be capable of manufacturing for us.
Additionally, in January 2024, there was congressional activity, including the introduction of the BIOSECURE Act (H.R. 7085) in the House of
Representatives and a substantially similar Senate bill (S.3558). If these bills became law, or similar laws are passed, they would have the potential to
severely restrict the ability of U.S. biopharmaceutical companies like us to purchase services or products from, or otherwise collaborate with, certain
Chinese biotechnology companies “of concern” without losing the ability to contract with, or otherwise receive funding from, the U.S. government. We do
business with companies in China and it is possible some of our contractual counterparties could impacted by the legislation described above.
If the third parties that we engage to supply any materials or manufacture product for our preclinical tests and clinical trials should cease to continue to do
so for any reason, we likely would experience delays in advancing these tests and trials while we identify and qualify replacement suppliers or
manufacturers and we may be unable to obtain replacement supplies on terms that are favorable to us. In addition, if we are not able to obtain adequate
supplies of our product candidates or the substances used to manufacture them, it will be more difficult for us to develop our product candidates and
compete effectively.
Our current and anticipated future dependence upon others for the manufacture of our product candidates (or the key starting and intermediate materials for
such product candidates) may adversely affect our future profit margins and our ability to develop product candidates and commercialize any products that
receive marketing approval on a timely and competitive basis.
Our future relationships with customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable
anti-kickback, fraud and abuse, false claims, transparency and other healthcare laws and regulations, which could expose us to criminal sanctions,
civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription
of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to
broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the
federal False Claims Act (FCA), which may constrain the business or financial arrangements and relationships through which we sell, market and distribute
any products for which we obtain marketing approval. The applicable federal, state and foreign healthcare laws and regulations that may affect our ability
to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any
remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for,
either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment
may be made, in whole or in part, under the Medicare and Medicaid programs or other federal healthcare programs. A person or entity can be
found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The Anti-Kickback Statute has
been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers,
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and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common
activities from prosecution;
the federal civil and criminal false claims laws, including the FCA, and civil monetary penalty laws, which prohibit any person or entity
from, among other things, knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval
by, the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or
fraudulent claim to the federal government. In addition, the government may assert that a claim including items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA;
HIPAA, which created federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to
defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money
or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and
knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements
in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal
Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statutes or specific intent
to violate them;
the Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which require manufacturers of drugs,
devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance
Program (with certain exceptions) to report annually to CMS information related to payments or other transfers of value made to physicians
(defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants,
nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants and certified nurse midwives), and
teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm
consumers; and
analogous or related foreign, state or local laws and regulations, including anti-kickback and false claims laws, which may apply to sales or
marketing arrangements and claims involving healthcare items or services reimbursed by non-government third-party payors, including
private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to
healthcare providers; and state laws that require drug manufacturers to report information related to payments and other transfers of value to
physicians and other healthcare providers or marketing expenditures.
Because of the breadth of the laws described above and the narrowness of the statutory exceptions and regulatory safe harbors available under them, it is
possible that some of our business activities could be subject to challenge under one or more of these laws.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in
light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between
healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare
industry. Ensuring that our business arrangements with third parties comply with applicable healthcare laws, as well as responding to investigations by
government authorities, can be time- and resource-consuming and can divert management’s attention from the business.
If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to
penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from
participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional
reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance
with these laws, any of which could harm our ability to operate our business and our financial results. Further, if the physicians or other providers or
entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from government funded healthcare programs. In addition, the approval and commercialization of any
product candidate we develop outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among
other foreign laws.
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Risks related to intellectual property
If we and our collaborators are unable to obtain and maintain sufficient patent and other intellectual property protection for our product candidates
and technology, our competitors could develop and commercialize products and technology similar or identical to ours, and we may not be able to
compete effectively in our market or successfully commercialize any product candidates we may develop.
Our success depends in significant part on our ability and the ability of our collaborators to obtain, maintain, enforce and defend patents and other
intellectual property rights with respect to our product candidates and technology and to operate our business without infringing, misappropriating, or
otherwise violating the intellectual property rights of others. If we and our collaborators are unable to obtain and maintain sufficient intellectual property
protection for our product candidates or the product candidates that we may identify, or if the scope of the intellectual property protection obtained is not
sufficiently broad, our competitors and other third parties could develop and commercialize product candidates similar or identical to ours, and our ability
(and the ability of our collaborators) to successfully commercialize the product candidates that we (and our collaborators) may pursue may be impaired.
Our patent coverage with respect to our clinical and preclinical programs is limited, and we can provide no assurance that any of our current or future
patent applications will result in issued patents or that any issued patents will provide us with any competitive advantage. Failure to obtain such issued
patents could negatively impact our ability to develop or commercialize any of our product candidates or technology.
We seek to protect our proprietary positions by, among other things, filing patent applications in the United States and abroad related to our current product
candidates and the product candidates that we may identify. Obtaining, maintaining, defending and enforcing pharmaceutical patents is costly, time
consuming and complex, and we may not be able to file and prosecute all necessary or desirable patent applications, or maintain, enforce and license any
patents that may issue from such patent applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable
aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing,
prosecution and maintenance of patent applications, or to maintain the rights to patents licensed to or from third parties.
Although we enter into confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development
output, such as our employees, collaborators, CROs, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach
the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. Further, we may not
be aware of all third-party intellectual property rights potentially relating to our product candidates. Publications of discoveries in the scientific literature
often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after
filing or, in some cases, not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our patents or
pending patent applications, or that we were the first to file for patent protection of such inventions.
The patent position of pharmaceutical companies generally is highly uncertain, involves complex legal, technological and factual questions and has, in
recent years, been the subject of much debate and litigation throughout the world. In addition, the laws of foreign countries may not protect our rights to the
same extent as the laws of the United States, or vice versa. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent
rights are highly uncertain. The subject matter claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be
reinterpreted after issuance. Therefore, our pending and future patent applications may not result in patents being issued in relevant jurisdictions that
protect our product candidates, in whole or in part, or which effectively prevent others from commercializing competitive product candidates, and even if
our patent applications issue as patents in relevant jurisdictions, they may not issue in a form that will provide us with any meaningful protection for our
product candidates or technology, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Additionally, our
competitors may be able to circumvent our patents by developing similar or alternative product candidates or technologies in a non-infringing manner.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent
offices in the United States and abroad. We may be subject to a third-party preissuance submission of prior art to the United States Patent and Trademark
Office (the USPTO) or become involved in opposition, derivation, revocation, reexamination, inter partes review, post-grant review or interference
proceedings challenging our patent rights or the patent rights of others, or other proceedings in the USPTO or applicable foreign offices that challenge
priority of invention or other features of patentability. An adverse determination in any such submission, proceeding or litigation could result in loss of
exclusivity or freedom to operate, patent claims being narrowed, invalidated or held unenforceable, in whole or in part, or limits of the scope or duration of
the patent protection of our product candidates, all of which could limit our ability to stop others from using or commercializing similar or identical product
candidates or technology to compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without
infringing third-party patent rights. In addition, if the breadth or strength of protection provided by
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our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or
commercialize current or future product candidates, or could negatively impact our ability to raise funds necessary to continue our research programs or
clinical trials. Such proceedings also may result in substantial costs and require significant time from our scientists and management, even if the eventual
outcome is favorable to us.
In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such
candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient
rights to exclude others from commercializing products or technology similar or identical to ours for a meaningful amount of time, or at all. Moreover,
some of our owned or licensed patents and patent applications are, and may in the future be, co-owned with third parties. If we are unable to obtain
exclusive licenses to any such co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third
parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any
such co-owners in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could harm our
competitive position, business, financial condition, results of operations and prospects.
We have entered into licensing agreements with third parties. If we or a third party fail to comply with the obligations in the agreements under which
we license intellectual property rights to or from third parties, or these agreements are terminated, or we otherwise experience disruptions to business
relationships with our licensors or licensees, competitive position, business, financial condition, results of operations and prospects could be harmed.
In addition to patent and other intellectual property rights we own or co-own, we have licensed, and may in the future license, patent and other intellectual
property rights to and from other parties. Licenses may not provide us with exclusive rights to use the applicable intellectual property and technology in all
relevant fields of use and in all territories in which we may wish to develop or commercialize our products and technology in the future. As a result, we
may not be able to prevent competitors from developing and commercializing competitive products or technologies.
In addition, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications or to maintain,
defend and enforce the patents that we license to or from third parties, and we may have to rely on our partners to fulfill these responsibilities.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties, the licensor may have the
right to terminate the license. If these agreements are terminated, the underlying patents fail to provide the intended exclusivity or we otherwise experience
disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business or be prevented
from developing and commercializing our product candidates, and competitors could have the freedom to seek regulatory approval of, and to market,
products identical to ours. Termination of these agreements or reduction or elimination of our rights under these agreements may also result in our having
to negotiate new or reinstated agreements with less favorable terms, cause us to lose our rights under these agreements, including our rights to important
intellectual property or technology, or impede, delay or prohibit the further development or commercialization of one or more product candidates that rely
on such agreements. It is possible that we may be unable to obtain any additional licenses at a reasonable cost or on reasonable terms, if at all. In that event,
we may be required to expend significant time and resources to redesign our product candidates or the methods for manufacturing them or to develop or
license replacement technology, all of which may not be feasible on a technical or commercial basis.
In addition, the research resulting in certain of our owned and in-licensed patent rights and technology was funded in part by the U.S. federal or state
governments. As a result, the government may have certain rights, including march-in rights, to such patent rights and technology. When new technologies
are developed with government funding, the government generally obtains certain rights in any resulting patents, including a non-exclusive license
authorizing the government to use the invention for noncommercial purposes. These rights may permit the government to disclose our confidential
information to third parties or allow third parties to use our licensed technology. The government can exercise its march-in rights if it determines that action
is necessary because we fail to achieve practical application of the government-funded technology, because action is necessary to alleviate health or safety
needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain
requirements to manufacture products embodying such inventions in the United States. Any of the foregoing could harm our competitive position, business,
financial condition, results of operations and prospects.
Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and certain provisions
in intellectual property license agreements may be susceptible to multiple interpretations. Disputes may arise between us and our licensing partners
regarding intellectual property subject to a license agreement, including:
•
the scope of rights granted under the license agreement and other interpretation-related issues;
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whether and the extent to which technology and processes of one party infringe on intellectual property of the other party that are not subject
to the licensing agreement;
rights to sublicense patent and other rights to third parties;
any diligence obligations with respect to the use of the licensed technology in relation to development and commercialization of our product
candidates, and what activities satisfy those diligence obligations;
the ownership of inventions and know-how resulting from the joint creation or use of intellectual property;
rights to transfer or assign the license; and
the effects of termination.
The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant
intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could
harm our business, financial condition, results of operations and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or
impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the
affected product candidates.
In addition, if our licensors or licensees fail to abide by the terms of the license, if the licensors or licensees fail to prevent infringement by third parties or
if the licensed patents or other rights are found to be invalid or unenforceable, our business, competitive position, financial condition, results of operations
and prospects could be materially harmed.
If we are unable to obtain licenses from third parties on commercially reasonable terms or at all, our business could be harmed.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required
to obtain a license from these third parties. The licensing of third-party intellectual property rights is a competitive area, and more established companies
may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. More established companies
may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In
addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third
party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to license needed
technology, or if we are forced to license this technology on unfavorable terms, our business could be materially harmed. If we are unable to obtain a
necessary license, we may be unable to develop or commercialize the affected product candidates, and the third parties owning such intellectual property
rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties or other forms of
compensation. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to
us.
We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might
subject us to infringement claims or adversely affect our ability to develop and market our product candidates.
We cannot guarantee that any of our or our licensors’ patent searches or analyses, including the identification of relevant patents, the scope of patent claims
or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending
patent application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction.
For example, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside
the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months
after the earliest filing for which priority is claimed, with the earliest filing date being commonly referred to as the priority date. Therefore, patent
applications covering our product candidates could have been filed by third parties without our knowledge. Additionally, pending patent applications that
have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use of our product
candidates. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history.
Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market
our product candidates. We may incorrectly determine that our product candidates are not covered by a third-party patent or may incorrectly predict
whether a third party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United
States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our product candidates. Our
failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our product candidates.
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If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to
successfully settle or otherwise resolve any infringement claims. If we fail in any of these disputes, in addition to being forced to pay damages, which may
be significant, we may be temporarily or permanently prohibited from commercializing any of our product candidates that are held to be infringing. We
might, if possible, also be forced to redesign product candidates so that we no longer infringe the third-party intellectual property rights. Any of these
events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to
devote to our business.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its
earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if
patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from
competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatory review of new
product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result,
our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or
identical to ours for a meaningful amount of time, or at all.
Depending upon the timing, duration and conditions of any FDA marketing approval of our product candidates, one or more of our owned or licensed U.S.
patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the
Hatch-Waxman Amendments, and similar legislation in the European Union and certain other countries. The Hatch-Waxman Amendments permit a patent
term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and
the FDA regulatory review process. However, we may not receive an extension if we fail to exercise due diligence during the testing phase or regulatory
review process, fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable
requirements. Moreover, the length of the extension could be less than we request. Only one patent per approved product can be extended, the extension
cannot extend the total patent term beyond 14 years from approval and only those claims covering the approved drug, a method for using it or a method for
manufacturing it may be extended. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period
during which we can enforce our patent rights for the applicable product candidate will be shortened and our competitors may obtain approval to market
competing products sooner. As a result, our revenue from applicable products could be reduced. Further, if this occurs, our competitors may take advantage
of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the
case.
Also, there are detailed rules and requirements regarding the patents that may be submitted to the FDA for listing in the Approved Drug Products with
Therapeutic Equivalence Evaluations (the Orange Book). We may be unable to obtain patents covering our product candidates that contain one or more
claims that satisfy the requirements for listing in the Orange Book. Even if we submit a patent for listing in the Orange Book, the FDA may decline to list
the patent, or a manufacturer of generic drugs may challenge the listing. If one of our product candidates is approved and a patent covering that product
candidate is not listed in the Orange Book, a manufacturer of generic drugs would not have to provide advance notice to us of any abbreviated new drug
application filed with the FDA to obtain permission to sell a generic version of such product candidate.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, maintaining, defending and enforcing patents on our product candidates in all countries throughout the world would be prohibitively
expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition,
the laws and enforcement practices of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the
United States. The current conflict between Russia and Ukraine may also make it difficult or impossible to continue to prosecute patent applications or
maintain patents in those countries or other affected territories. For example, in March 2022, a decree was adopted by the Russian government allowing
Russian companies and individuals to exploit inventions owned by patentees from the United States without consent or compensation. Consequently, we
may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made
using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained
patent protection to develop their own products and may export otherwise infringing products to territories where we have patent protection, but
enforcement rights are not as strong as those in the United States. These products may compete with our product candidates and our patents or other
intellectual property rights may not be effective or sufficient to prevent them from competing.
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Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems
of some countries do not favor the enforcement or protection of patents, trade secrets and other intellectual property, which could make it difficult for us to
stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. We may
need to share our trade secrets and proprietary know-how with current or future partners, collaborators, contractors and others located in countries at
heightened risk of theft of trade secrets, including through direct intrusion by private parties or foreign actors, and those affiliated with or controlled by
state actors. Proceedings to enforce our intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and
attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of
not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other
remedies awarded, if any, may not be commercially meaningful.
Many foreign countries, including some European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner
may be compelled under specified circumstances to grant licenses to third parties. In addition, many countries limit the enforceability of patents against
government agencies or government contractors. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a
license to a third party, which could materially diminish the value of the applicable patents. This could limit our potential revenue opportunities.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from
the intellectual property that we develop or license.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
Obtaining and enforcing patents in the pharmaceutical industry is inherently uncertain, due in part to ongoing changes in the patent laws. For example, in
the United States, depending on decisions by Congress, the federal courts, and the USPTO, the laws and regulations governing patents and interpretation
thereof, could change in ways that could weaken our and our licensors’ or collaborators’ ability to obtain new patents or to enforce existing or future
patents, or that affect the term of our or our licensors’ or collaborators’ patents. For example, the U.S. Supreme Court has ruled on several patent cases in
recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain
situations. Therefore, there is increased uncertainty with regard to our and our licensors’ or collaborators’ ability to obtain patents in the future, as well as
uncertainty with respect to the value of patents once obtained.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ or collaborators’ patent
applications and the enforcement or defense of our or our licensors’ or collaborators’ issued patents. For example, assuming that other requirements for
patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United
States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act (the Leahy-Smith Act)
enacted in September 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are
met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the
claimed invention. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications are prosecuted and may also
affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to
challenge the validity of a patent by USPTO-administered post-grant proceedings, including post-grant review, inter partes review and derivation
proceedings. The USPTO has developed regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes
to patent law associated with the Leahy-Smith Act, particularly the first inventor-to-file provisions. Accordingly, it is not clear what, if any, impact the
Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and
costs surrounding the prosecution of our or our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents.
Similarly, statutory or judicial changes to the patent laws of other countries may increase the uncertainties and costs surrounding the prosecution of patent
applications and the enforcement or defense of issued patents.
On June 1, 2023, the European Patent Package (the EU Patent Package) regulations were implemented with the goal of providing a single pan-European
Unitary Patent and a new European Unified Patent Court (the UPC), for litigation involving European patents. Under the UPC, all European patents,
including those issued prior to ratification of the European Patent Package, by default automatically fall under the jurisdiction of the UPC. The UPC
provides our competitors with a new forum to centrally revoke our European patents, and allows for the possibility of a competitor to obtain pan-European
injunctions. It will be several years before we will understand the scope of patent rights that will be recognized and the strength of patent remedies provided
by the UPC. As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation. We have the right to opt our
patents out of the UPC over the first seven years of the court’s existence, but doing so may preclude us from realizing the benefits, if any, of the new
unified court.
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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated if we fail to comply with these
requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other fees are required to be paid to the USPTO and foreign patent agencies in several
stages over the lifetime of a patent. In certain circumstances, we rely on our licensors and collaborators to pay these fees. The USPTO and various foreign
patent agencies also require compliance with a number of procedural, documentary, fee payment and other similar requirements during the patent
application and prosecution process. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to
respond to official communications within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. While
an inadvertent lapse can in some cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in
which non-compliance can result in irrevocable abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent
rights in the relevant jurisdiction. If we or our licensors or collaborators fail to maintain the patents and patent applications covering our product candidates,
our competitors might be able to enter the market with similar or identical products or technology, which would harm our business, financial condition,
results of operations and prospects.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and
unsuccessful, and issued patents covering our technology and product candidates could be found invalid or unenforceable if challenged.
Competitors and other third parties may infringe or otherwise violate our issued patents or other intellectual property or the patents or other intellectual
property of our licensors. In addition, our patents or the patents of our licensors may become involved in inventorship or priority disputes. Our pending
patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such
applications. To counter infringement or other unauthorized use, we may be required to file infringement claims, which can be expensive and time-
consuming. Our ability to enforce patent rights also depends on our ability to detect infringement. It may be difficult to detect infringers who do not
advertise the components or methods that are used in connection with their products and services. Moreover, it may be difficult or impossible to obtain
evidence of infringement in a competitor’s or potential competitor’s product or service. Any claims we assert against perceived infringers could provoke
these parties to assert counterclaims against us alleging that we infringe their patents or that our patents are invalid or unenforceable. In a patent
infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or
refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology. An adverse result in any
litigation proceeding could put one or more of our owned or licensed patents at risk of being invalidated, held unenforceable or interpreted narrowly. We
may find it impractical or undesirable to enforce our intellectual property against some third parties.
If we were to initiate legal proceedings against a third party to enforce a patent directed to our product candidates, or one of our future product candidates,
the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging
invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements,
including lack of novelty, obviousness, non-enablement or insufficient written description. Grounds for an unenforceability assertion could be an allegation
that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution.
Third parties may also raise similar claims before the USPTO or an equivalent foreign body, even outside the context of litigation. Potential proceedings
include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings and equivalent proceedings in foreign
jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way
that they no longer cover our technology or any product candidates that we may develop. The outcome following legal assertions of invalidity and
unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art of which we
and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would
lose at least part, and perhaps all, of the patent protection on the applicable product candidates or technology covered by the patent rendered invalid or
unenforceable.
Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions
with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license
rights to it from the prevailing party. Our business could be materially harmed if the prevailing party does not offer us a license on commercially reasonable
terms.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during this type of litigation.
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Some of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs of
complex patent litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed
intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon, misappropriating or
otherwise violating our intellectual property. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims could
result in substantial costs and diversion of management resources, which could harm our business. In addition, the uncertainties associated with litigation
could compromise our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, or in-license needed
technology or other product candidates. There could also be public announcements of the results of the hearing, motions, or other interim proceedings or
developments. If securities analysts or investors perceive those results to be negative, it could cause the price of shares of our common stock to decline.
Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights,
the outcome of which would be uncertain and could negatively impact the success of our business.
Our commercial success depends upon our ability to develop, manufacture, market and sell our product candidates and use our proprietary technologies
without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties. There is considerable
intellectual property litigation in the pharmaceutical industry.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product
candidates and their manufacture and our other technology, including re-examination, interference, post-grant review, inter partes review or derivation
proceedings before the USPTO or an equivalent foreign body. Numerous U.S. and foreign issued patents and pending patent applications owned by third
parties exist in the fields in which we are developing our product candidates. Third parties may assert infringement claims against us based on existing
patents or patents that may be granted in the future, regardless of their merit.
Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of
infringement, validity, enforceability or priority. A court of competent jurisdiction could hold that third-party patents asserted against us are valid,
enforceable and infringed, which could materially and adversely affect our ability to commercialize any of our product candidates and any other product
candidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity of a U.S. patent in federal court, we
would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of
a U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are found to
infringe, misappropriate or otherwise violate a third party’s intellectual property rights, and we are unsuccessful in demonstrating that these rights are
invalid or unenforceable, we could be required to obtain a license from such a third party in order to continue developing and marketing our products and
technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a
license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court
order, to cease commercializing the infringing technology or product. A finding of infringement could prevent us from commercializing our product
candidates or force us to cease some of our business operations. In the event of a successful claim of infringement against us, we may have to pay
substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties and other fees, redesign our infringing product
candidate or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Claims that we
have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
We may be subject to claims by third parties asserting that we or our employees have infringed upon, misappropriated or otherwise violated their
intellectual property rights, or claiming ownership of what we regard as our own intellectual property.
Many of our employees were previously employed at other biotechnology or pharmaceutical companies, and our consultants and advisors may work for
other biotechnology or pharmaceutical companies in addition to us. Although we try to ensure that our employees, consultants and advisors do not use the
proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed
intellectual property, including trade secrets or other proprietary information, of any of these individuals’ former or concurrent employers or clients. We
may also be subject to claims that patents and applications we have filed to protect inventions of our employees, consultants and advisors, even those
related to one or more of our product candidates, are rightfully owned by their former or concurrent employer. Litigation may be necessary to defend
against these claims.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel. Even if we are successful in prosecuting or defending against these claims, litigation could result in substantial costs, delay development of our
product candidates and be a distraction to management.
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We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed
patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes that
arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. While it is our policy to
require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning this intellectual
property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our
own. Our and their assignment agreements may not be self-executing or may be breached, and litigation may be necessary to defend against these and other
claims challenging inventorship or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or
our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as
exclusive ownership of, or right to use, intellectual property that is important to our product candidates. Even if we are successful in defending against such
claims, litigation could result in substantial costs and be a distraction to management and other employees.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and
could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results
of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have
a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce
the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other
resources to conduct such litigation or proceedings adequately. As noted above, some of our competitors may be able to sustain the costs of such litigation
or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds
necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development
collaborations that would help us commercialize our product candidates, if approved.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
We rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology and other proprietary information (including
unpatented know-how associated with Warp Drive Bio) and to maintain our competitive position. Trade secrets and know-how can be difficult to protect.
We seek to protect these trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties
who have access to them, such as our employees, collaborators, CROs, contract manufacturers, consultants, advisors and other third parties. We also enter
into confidentiality and invention or patent assignment agreements with our employees and consultants. We cannot guarantee that we have entered into
these agreements with each party that may have or has had access to our trade secrets or proprietary technology and processes. Despite our efforts, any of
these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate
remedies for such breaches. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products that we consider proprietary.
Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary information will
be effective.
We also seek to preserve the integrity and confidentiality of our confidential proprietary information by maintaining physical security of our premises and
physical and electronic security of our information technology systems, but it is possible that these security measures could be breached. Enforcing a claim
that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition,
some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully
obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or
information to compete with us. If any of our trade secrets were to be disclosed to, or independently developed by, a competitor or other third party, our
competitive position would be materially and adversely harmed.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our
business may be adversely affected.
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Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on
other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential
collaborators or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our
ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims
brought by owners of other trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long
term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our
business may be adversely affected. We may license our trademarks and trade names to third parties, such as distributors. Though these license agreements
may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by
our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names. Our efforts to enforce or protect our
proprietary rights related to trademarks, trade names, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could
result in substantial costs and diversion of resources.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not
adequately protect our business or permit us to maintain our competitive advantage. For example:
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others may be able to make products that are similar to any product candidates we may develop or utilize similar technology but that are not
covered by the claims of our patents or the patents that we license or may own in the future;
we, or our current or future licensors, might not have been the first to make the inventions covered by an issued patent or pending patent
application that we license or may own in the future;
we, or our current or future licensors might not have been the first to file patent applications covering certain of our or their inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or
licensed intellectual property rights;
it is possible that our pending owned or licensed patent applications or those that we may own or license in the future will not lead to issued
patents;
issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors;
our competitors might conduct research and development activities in countries where we do not have patent rights and then use the
information learned from such activities to develop competitive products for sale in our major commercial markets;
we may not develop additional proprietary technologies that are patentable;
the patents of others may harm our business; and
we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent
covering such intellectual property.
Risks related to employee matters and managing our growth
We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may
not be able to successfully implement our business strategy.
We are highly dependent on members of our executive team. The loss of the services of any of them may adversely impact the achievement of our
objectives. Any of our executive officers could leave our employment at any time, as all of our employees are “at-will” employees. We currently do not
have “key person” insurance on any of our employees. The loss of the services of one or more of our key personnel might impede the achievement of our
research, development and commercialization objectives.
Recruiting and retaining qualified employees, consultants and advisors for our business, including scientific and technical personnel, is critical to our
success. Competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable
terms given the competition among numerous pharmaceutical and biotechnology companies and academic institutions for skilled individuals. In addition,
failure to succeed in preclinical studies, clinical trials or applications for marketing approval may make it more challenging to recruit and retain qualified
personnel. The inability to recruit, or the loss of
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services of certain executives, key employees, consultants or advisors, may impede the progress of our research, development and commercialization
objectives.
We currently have no sales organization. If we are unable to establish sales capabilities on our own or through third parties, we may not be able to
market and sell any products effectively, if approved, or generate product revenue.
We currently do not have a marketing or sales organization. In order to commercialize any product, if approved, in the United States and foreign
jurisdictions, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to
perform these services, and we may not be successful in doing so. In advance of any of our product candidates receiving regulatory approval, we expect to
establish a sales organization with technical expertise and supporting distribution capabilities to commercialize each such product candidate, which will be
expensive and time-consuming. We have no prior experience in the marketing, sale and distribution of pharmaceutical products, and there are significant
risks involved in building and managing a sales organization, including our ability to hire, retain, and incentivize qualified individuals, generate sufficient
sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any
failure or delay in the development of our sales, marketing and distribution capabilities would adversely impact the commercialization of these products.
We may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and
distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into such arrangements on acceptable terms or at
all, we may not be able to successfully commercialize our product candidates.
We will need to increase the size of our organization, and we may experience difficulties in managing this growth.
As of December 31, 2023, we had 378 full-time employees, including 308 employees engaged in research and development. As our development and
commercialization plans and strategies develop, and as we operate as a public company, we expect to need additional managerial, research and
development, operational, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of
management, including:
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identifying, recruiting, integrating, maintaining and motivating additional employees;
managing our internal development efforts effectively, including the clinical and FDA review process for any product candidate we develop,
while complying with our contractual obligations to contractors and other third parties; and
improving our operational, financial and management controls, reporting systems and procedures.
Our future financial performance and our ability to advance development of and, if approved, commercialize any product candidate we develop will
depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its
attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to
provide certain services, including substantially all aspects of marketing approval, clinical management and manufacturing. We cannot assure you that the
services of independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find
qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by
consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain marketing approval
of any current or future product candidates or otherwise advance our business. We cannot assure you that we will be able to manage our existing
consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all.
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be
able to successfully implement the tasks necessary to further develop and commercialize any of our product candidates and, accordingly, may not achieve
our research, development and commercialization goals.
We have in the past engaged and may in the future engage in strategic transactions; these transactions could affect our liquidity, dilute our existing
stockholders, increase our expenses and present significant challenges in focus and energy to our management or prove not to be successful.
From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of
intellectual property, products or technologies. For example, in October 2018, we acquired all of the outstanding shares of Warp Drive Bio, which became
our direct wholly owned subsidiary and in November 2023, we completed the EQRx Acquisition.
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Additional potential transactions that we may consider in the future include a variety of business arrangements, including spin-offs, strategic partnerships,
joint ventures, restructurings, divestitures, business combinations and investments. Any future transactions could result in potentially dilutive issuances of
our equity securities, including our common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process research
and development expenses, any of which could affect our financial condition, liquidity and results of operations. Future acquisitions may also require us to
obtain additional financing, which may not be available on favorable terms or at all. These transactions may never be successful and may require
significant time and attention of management. In addition, the integration of any business that we may acquire in the future may disrupt our existing
business and may be a complex, risky and costly endeavor for which we may never realize the full benefits of the acquisition.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could
negatively impact our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use,
storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including
chemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generally contract with third parties for the
disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury
resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also
could incur significant costs associated with civil or criminal fines and penalties.
Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to our employees resulting from
the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for
environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive
materials.
We or the third parties upon whom we depend may be adversely affected by earthquakes, outbreak of disease, or other natural disasters and our
business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Our corporate headquarters and other facilities are located in the San Francisco Bay Area, which in the past has experienced both severe earthquakes,
wildfires and flooding. We do not carry earthquake insurance. Earthquakes, wildfires or other natural disasters could severely disrupt our operations, and
negatively impact our business.
If a natural disaster, power outage, outbreak of disease, or other event occurred that prevented us from using all or a significant portion of our headquarters,
that damaged critical infrastructure, such as our enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that
otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The
disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or
similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly
when taken together with our lack of earthquake insurance, could negatively impact our business.
Furthermore, integral third parties used in our preclinical activities and in our supply chain are similarly vulnerable to natural disasters, outbreak of disease,
or other sudden, unforeseen and severe adverse events. If such an event were to affect our preclinical activities or our supply chain, it could negatively
impact our business.
Our employees, independent contractors, vendors, principal investigators, CROs and consultants may engage in misconduct or other improper
activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk that our employees, independent contractors, vendors, principal investigators, CROs and consultants may engage in fraudulent
conduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities
to us that violate the regulations of the FDA or comparable foreign regulatory authorities, including those laws requiring the reporting of true, complete and
accurate information to such authorities; healthcare fraud and abuse laws and regulations in the United States and abroad; or laws that require the reporting
of financial information or data accurately. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws
and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or
prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials or creating fraudulent data in our
preclinical studies or clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify
and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in
controlling unknown or unmanaged
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risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or
regulations. Additionally, we are subject to the risk that a person could allege fraud or other misconduct, even if none occurred. If any such actions are
instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business,
including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare,
Medicaid and other federal healthcare programs, contractual damages, reputational harm, and curtailment of our operations.
Risks related to our common stock and warrants
The price of our common stock is volatile and fluctuates substantially, which could result in substantial losses for investors.
Our stock price is highly volatile. The stock market in general, and the market for biopharmaceutical companies in particular, have experienced extreme
volatility that has often been unrelated to the operating performance of particular companies.
The market price for our common stock may be influenced by many factors, including:
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our research and development efforts and our ability to discover and develop product candidates;
results of our clinical trials and preclinical studies or those of our competitors;
the success of competitive products or technologies;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to our product candidates or clinical development programs;
the results of our efforts to discover, develop, acquire or in-license product candidates or companion diagnostics;
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors; and
general economic, industry and market conditions.
In addition, stock markets with respect to public companies, particularly companies in the biotechnology industry, have experienced significant price and
volume fluctuations that have affected and continue to affect, the stock prices of these companies. Stock prices of many companies, including
biotechnology companies, have fluctuated in a manner often unrelated to the operating performance of those companies. In the past, companies that have
experienced volatility in the trading price of their securities have been subject to securities class action litigation.
An active and liquid market for our common stock may not be sustained.
Our common stock is currently listed on the Nasdaq Global Select Market under the symbol “RVMD”. The price of our common stock may vary, and an
active and liquid market in our common stock may not be sustained. The lack of an active market may impair the value of your shares, your ability to sell
your shares at the time you wish to sell them and the prices that you may obtain for your shares. An inactive market may also impair our ability to raise
capital by selling our common stock and our ability to acquire other companies, products or technologies by using our common stock as consideration.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We do not currently intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to invest our future earnings, if
any, to fund our growth. Therefore, stockholders are not likely to receive any dividends on their common stock for the foreseeable future. Since we do not
intend to pay dividends, stockholders’ ability to receive a return on their investment will depend on any future appreciation in the market value of our
common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.
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Our executive officers, directors and their affiliates have significant influence over our company, which will limit your ability to influence corporate
matters and could delay or prevent a change in corporate control.
As of December 31, 2023, our executive officers, directors and their affiliates beneficially owned, in the aggregate, approximately 7.3% of our outstanding
common stock. As a result, these stockholders, if they act together, may be able to influence our management and affairs and the outcome of matters
submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation or sale of all or substantially all of our
assets. In addition, this concentration of ownership might adversely affect the market price of our common stock by:
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delaying, deferring or preventing a change of control of us;
impeding a merger, consolidation, takeover or other business combination involving us; or
discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of us.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the market price of our
common stock could decline.
As of December 31, 2023, 21.9 million shares of common stock that are either subject to outstanding options or restricted stock units reserved for future
issuance under our equity incentive plans are eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules,
lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they
will be sold, in the public market, the market price of our common stock could decline.
In addition, as of December 31, 2023, holders of approximately 2.1 million shares of our common stock are entitled to rights with respect to the registration
of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without
restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could impact the market price of
our common stock.
There is no guarantee that the warrants will ever be in the money, and they may expire worthless.
The warrants entitle registered holders to purchase 0.1112 shares of our common stock at an exercise price of $11.50 per such fractional share of common
stock. There is no guarantee that the warrants will ever be in the money prior to their expiration, and as such, the warrants could expire worthless.
We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then-
outstanding warrants. As a result, the exercise price of a holder’s warrants could be increased, the exercise period could be shortened and the number
of shares of our common stock purchasable upon exercise of a warrant could be decreased, all without the approval of that warrant holder.
Our warrants were issued in registered form under a Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and
EQRx, Inc. Following the EQRx Acquisition, the warrants became exercisable for shares of our common stock, and we appointed Equiniti Trust Company,
LLC as the warrant agent. The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any
ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding warrants to make any change
that adversely affects the interests of the registered holders. Accordingly, we may only amend the terms of the warrants in a manner adverse to a holder if
holders of at least 50% of the then-outstanding warrants approve of the amendment, including to, among other things, increase the exercise price of the
warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of common stock purchasable upon exercise
of a warrant.
We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants
worthless.
We have the ability to redeem our outstanding public warrants at any time prior to their expiration (A) at a price of $0.01 per public warrant; provided that
the last reported sales price of our common stock equals or exceeds $161.87 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give
notice of such redemption to the public warrant holders and provided certain
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other conditions are met, and (B) at a price of $0.10 per public warrant; provided that (i) holders will be able to exercise their public warrants on a cashless
basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market
value” of the common stock, (ii) if the last reported sales price of Common Stock equals or exceeds $89.93 per share (as adjusted for adjustments to the
number of shares issuable upon exercise or the exercise price of a public warrant as described in the “Description of Securities” filed as Exhibit 4.3 hereto
under the heading “Public warrants — Anti-dilution Adjustments”) for any 20 trading days within the 30-trading day period ending three trading days
before we send the notice of redemption to the public warrant holders, (iii) if the closing price of our common stock for any 20 trading days within a 30-
trading day period ending three trading days before we send the notice of redemption to the public warrant holders is less than $161.87 per share (as
adjusted), the private warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants and (iv) provided
certain other conditions are met. A redemption in accordance with (B) above may result in public warrant holders having to exercise the public warrants at
a time when they are out-of-the-money or receive nominal consideration from the Company for them.
The terms of the private warrants are substantially the same as to the public warrants; provided, that, except as described above in the discussion of the
redemption of public warrants when the price per share of our common stock equals or exceeds $89.93, the private warrants are exercisable on a cashless
basis and are non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the private warrants are held by
someone other than the initial purchasers or their permitted transferees, the private warrants are redeemable by the Company and exercisable by such
holders on the same basis as the public warrants. Please see Exhibit 4.3 “Description of Securities — Warrants — Public Warrants” for additional
information.
If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying
securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force the warrant holders: (i) to exercise their
warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so; (ii) to sell their warrants at the then-current market
price when they might otherwise wish to hold their warrants; or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are
called for redemption, is likely to be substantially less than the market value of their warrants.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes has been limited by “ownership changes” and may be further
limited.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), and corresponding provisions of state law, if a corporation
undergoes an “ownership change” (generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a rolling three-
year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research and
development tax credits) to offset its post-change income or taxes may be limited. We have experienced ownership changes in the past, and we may
experience ownership changes in the future as a result of our public offerings or other changes in our stock ownership (some of which are not in our
control). Use of our federal and state net operating loss carryforwards has been limited as a result of ownership changes and could be further limited if we
experience additional ownership changes.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to
entrenchment of management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent changes in control or
changes in our management without the consent of our board of directors. These provisions include the following:
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a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of our
board of directors;
no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
the exclusive right of our board of directors to appoint a director to fill a vacancy created by the expansion of the board of directors or the
resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those
shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a
hostile acquiror;
the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;
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the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and
restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of
directors;
a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our
stockholders;
the requirement that a special meeting of stockholders may be called only by our chief executive officer or president or by the board of
directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of
directors; and
advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters
to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to
elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation
may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three
years or, among other exceptions, the board of directors has approved the transaction.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may
reduce the amount of money available to us.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each
case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements
that we have entered into with our directors and officers provide that:
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we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the
fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;
we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;
we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such
directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;
we are not obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person
against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to
indemnification;
the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements
with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and
we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers,
employees and agents.
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Our amended and restated certificate of incorporation and amended and restated bylaws provide for an exclusive forum in the Court of Chancery of
the State of Delaware for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the
exclusive forum for any state law derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting
a claim against us arising pursuant to the Delaware General Corporation Law, any action to interpret, apply, enforce, or determine the validity of our
amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the
internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the
Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of
the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in
the State of Delaware. Our amended and restated bylaws also provide that the federal district courts of the United States of America will be the exclusive
forum for the resolution of any complaint asserting a cause or causes of action under the Securities Act. Such provision is intended to benefit and may be
enforced by us, our officers and directors, the underwriters to any offering giving rise to such a complaint and any other professional or entity whose
profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering.
Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the
Exchange Act from bringing such claims in state or federal court, subject to applicable law.
We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by
chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited
schedule relative to other forums and protection against the burdens of multi-forum litigation. This choice of forum provision may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders,
which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal
securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’
certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable
or unenforceable. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek
to bring a claim in a venue other than those designated in the exclusive-forum provisions, and there can be no assurance that such provisions will be
enforced by a court in those other jurisdictions. If a court were to find the choice of forum provision in our amended and restated certificate of
incorporation or amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving
such action in other jurisdictions, which could adversely affect our business, financial condition, results of operations and prospects.
General risk factors
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies.
To date, we have primarily financed our operations through the sale or issuance of preferred stock and common stock, upfront payments and research and
development cost reimbursement received in connection with our prior collaboration with Sanofi and the EQRx Acquisition. We will be required to seek
additional funding in the future and may do so through a combination of public or private equity offerings, debt financings, credit or loan facilities,
collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements. If we raise additional capital through
marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish
certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be
favorable to us. If we raise additional funds by issuing equity securities, our stockholders may suffer dilution and the terms of any financing may adversely
affect the rights of our stockholders. For example, the EQRx Acquisition, an all-stock transaction pursuant to which we issued shares of our common stock
according to a blended formula, resulted in substantial dilution to our stockholders. In addition, as a condition to providing additional funds to us, future
investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive
covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of
our equity securities would receive any distribution of our corporate assets. Attempting to secure additional financing may also divert our management
from our day-to-day activities, which may adversely affect our ability to develop our product candidates.
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Litigation, including proceedings related to intellectual property claims, could cause us to spend substantial resources and distract our personnel from
their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings, including proceedings related to intellectual property claims, may cause us to incur
significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these
results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially
increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may
not have sufficient financial or other resources to conduct such litigation or proceedings adequately. As noted above, some of our competitors may be able
to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. In the case of intellectual
property litigation, uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to
compete in the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our research programs,
license necessary technology from third parties, or enter into development collaborations that would help us commercialize our product candidates, if
approved.
We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations. We
can face serious consequences for violations.
Among other matters, U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, which are
collectively referred to as Trade Laws, prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants,
consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or
improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal
fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm
and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals,
universities, and other organizations. We also expect our non-U.S. activities to increase in time. We plan to engage third parties for clinical trials and/or to
obtain necessary permits, licenses, patent registrations and other regulatory approvals and we can be held liable for the corrupt or other illegal activities of
our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities.
We may be adversely affected by events adversely affecting the financial services industry.
We may be adversely affected by general conditions in the global economy and in the global financial markets, including the current inflationary
environment and rising interest rates. Adverse developments that affect financial institutions or concerns or rumors about these events have in the past and
may in the future lead to market-wide liquidity problems. For example, in March 2023, Silicon Valley Bank was closed by the California Department of
Financial Protection and Innovation, which appointed the U.S. Federal Deposit Insurance Corporation (FDIC) as receiver. Similarly, other institutions have
been and may continue to be swept into receivership. Uncertainty may remain over liquidity concerns in the broader financial services industry, and there
may be unpredictable impacts to our business and our industry. We cannot anticipate all the ways in which the global financial market conditions could
adversely impact our business in the future.
Although we assess our banking relationships as we believe necessary or appropriate, our access to deposits or other financial assets on a timely basis or in
adequate amounts could be significantly impaired by factors that affect the financial institutions with which we have banking relationships or the financial
markets or financial services industry generally. These factors could include, among others, events such as liquidity constraints or failures, the ability to
perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services
industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.
We maintain our cash at financial institutions, in balances that may exceed federally insured limits.
We maintain the majority of our cash and cash equivalents in accounts at banking institutions in the United States that we believe are of high quality. Cash
held in these accounts may exceed the FDIC insurance limits. If these banking institutions were to fail, we could lose all or a portion of amounts held in
excess of these insurance limitations. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can
be no assurance that we would be able to access uninsured funds in a timely manner or at all.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
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Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and
could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results
of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have
a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce
the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other
resources to conduct such litigation or proceedings adequately. As noted above, some of our competitors may be able to sustain the costs of such litigation
or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds
necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development
collaborations that would help us commercialize our product candidates, if approved.
We incur significantly increased costs as a result of operating as a public company, and our management devotes substantial time to new compliance
initiatives. We may fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002, which could
result in sanctions or other penalties that would harm our business.
We incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under
the Securities Exchange Act of 1934, as amended (the Exchange Act), and regulations regarding corporate governance practices. The listing requirements
of the Nasdaq Global Select Market and the rules of the SEC require that we satisfy certain corporate governance requirements relating to director
independence, filing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct.
Our management and other personnel devote a substantial amount of time to comply with all of these requirements. Moreover, the reporting requirements,
rules and regulations will increase our legal and financial compliance costs and make some activities more time-consuming and costly. Any changes we
make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These
reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also
make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers,
or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms. Stockholder activism, the current political
environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure
obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently
anticipate.
As a public company, we are subject to Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) and the related rules of the SEC, which generally
require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting.
In order to provide the reports required by these rules we must conduct reviews and testing of our internal controls. During the course of our review and
testing, we may identify deficiencies and be unable to remediate them before we must provide the required reports. Furthermore, if we have a material
weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially
misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control
over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the
trading price of our stock to fall. In addition, as a public company we are required to file accurate and timely quarterly and annual reports with the SEC
under the Exchange Act. In order to report our results of operations and financial statements on an accurate and timely basis, we will depend on third-party
vendors to provide timely and accurate notice of their costs to us. Any failure to report our financial results on an accurate and timely basis could result in
sanctions, lawsuits, delisting of our shares and warrants from the Nasdaq Global Select Market or other adverse consequences.
If we sell shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our stock price may
decline.
We have issued in the past, and may from time to time issue, additional shares of common stock at a discount from the current trading price of our common
stock. As a result, our stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such discount. In
addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities,
preferred stock or common stock. For example, on November 10, 2021, we entered into a sales agreement with Cowen to sell shares of common stock,
from time to time, with aggregate gross sales proceeds of up to $250.0 million, through an at-the-market equity offering program under which Cowen acts
as our sales agent. As of December 31, 2023, we have completed sales totaling $125.2 million in gross proceeds pursuant to this program. After deducting
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commissions and expenses of $3.1 million, net proceeds to us were $122.1 million. In addition, in November 2023, we completed the EQRx Acquisition,
which was an all-stock transaction pursuant to which we issued shares of our common stock according to a blended formula, resulting in substantial
dilution to our stockholders. If we in the future issue common stock or securities convertible into common stock, our common stockholders would
experience additional dilution and, as a result, our stock price may decline.
If securities analysts do not continue to publish research or reports about our business or if they publish negative evaluations of our stock, the price of
our stock could decline.
The trading market for our common stock relies, in part, on the research and reports that industry or financial analysts publish about us or our business. If
few analysts publish research or reports about us, the trading price of our stock would likely decrease. If one or more of the analysts covering our business
downgrades their evaluations of our stock, the price of our stock could decline. If one or more of these analysts ceases to cover our stock, we could lose
visibility in the market for our stock, which, in turn, could cause our stock price to decline.
If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements
could be impaired, investors may lose confidence in our financial reporting and the trading price of our common stock may decline.
Pursuant to Section 404 of Sarbanes-Oxley, our management is required to report upon the effectiveness of our internal control over financial reporting and
our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting. The rules
governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant
documentation, testing and possible remediation.
There may be material weaknesses in our internal control over financial reporting in the future. Any failure to implement and maintain internal control over
financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to
conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a
material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports,
the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory
authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control
systems required of public companies, could also restrict our future access to the capital markets.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity and availability of our
critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan.
Our cybersecurity program is designed to align with industry standards and best practices for similarly situated companies in our industry and at our stage
of development, and includes benchmarking against standards such as the National Institute of Standards and Technology Cybersecurity Framework (the
NIST CSF). This does not imply that we meet any particular technical standards, specifications or requirements, only that we use the NIST CSF as a guide
to help us identify, assess and manage cybersecurity risks relevant to our business. We also monitor and evaluate our cybersecurity posture and
performance on an ongoing basis through periodic vulnerability scans, penetration tests and threat intelligence feeds. We use various tools and
methodologies to manage cybersecurity risk that are tested on a periodic cadence.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies,
reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational
and financial risk areas.
Our cybersecurity risk management program includes:
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risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services and our broader
enterprise IT environment;
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a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls and (3) our
response to cybersecurity incidents;
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
cybersecurity awareness training that is provided to our employees and contractors, including those who are involved in incident response];
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and
assessment of cybersecurity risks posed by third parties, including current and potential collaborators, service providers, suppliers, vendors
and other contractual counterparties, in each case, to the extent they have access to our critical systems or information.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are
reasonably likely to materially affect us. For more information, see the section titled “Risk Factor— Risks related to product development and regulatory
process— Our business and operations, or those of our CROs or third parties, may suffer in the event of information technology system failures,
cyberattacks or deficiencies in our cybersecurity, which could materially affect our results”.
Cybersecurity Governance
Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other
information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program.
The Audit Committee receives scheduled annual reports from management on our cybersecurity risks, our cybersecurity risk management program and
other cybersecurity-related educational topics. In addition, management updates the Audit Committee as necessary, regarding other cybersecurity incidents,
including any material cybersecurity incidents.
The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from
management as necessary regarding cybersecurity.
Our management team, including our Chief Information Officer and VP, Head of Information Security, is responsible for assessing and managing our
material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both
our internal cybersecurity personnel and our retained external cybersecurity consultants. Our Chief Information Officer and VP, Head of Information
Security have more than 40 years of combined experience in the field of information technology.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may
include briefings from internal security personnel; threat intelligence and other information obtained from government, public or private sources, including
external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Item 2. Properties.
Our corporate headquarters is located in Redwood City, California, where we lease and occupy approximately 142,800 square feet of office and laboratory
space. The term of our Redwood City lease expires in December 2035.
Our lease of approximately 22,000 square feet of office and laboratory space in Cambridge, Massachusetts, which was subleased to Casma Therapeutics,
Inc. expired in February 2023.
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We believe our existing facilities are sufficient for our needs for the foreseeable future. To meet the future needs of our business, we may lease additional or
alternate space, and we believe suitable additional or alternative space will be available in the future on commercially reasonable terms.
Item 3. Legal Proceedings.
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that,
in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse
impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources
and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market price of common stock
Our common stock and public warrants are listed on the Nasdaq Global Select Market under the symbols “RVMD” and “RVMDW”, respectively. Prior to
February 13, 2020, there was no public trading market for our common stock.
As of February 21, 2024, there were 100 holders of record of our common stock and 5 holders of record of our public warrants. We believe the actual
number of holders of our common stock is greater than the number of record holders included herein as this number does not include holders whose shares
are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in
trust by other entities.
Dividend policy
We have never declared or paid cash dividends on our common stock. We intend to retain all available funds and any future earnings, if any, to fund the
development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination related
to dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial
condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors might deem relevant.
Stock performance graph
This graph is not “soliciting material” or deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities
under that Section, and shall not be deemed incorporated by reference into any filing of Revolution Medicines, Inc. under the Securities Act of 1933, as
amended (the Securities Act), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The following graph compares the cumulative total return to stockholder return on our common stock relative to the cumulative total returns of the
NASDAQ Composite Index and the NASDAQ Biotechnology Index. An investment of $100 is assumed to have been made in our common stock and each
index on February 13, 2020 (the first day of trading of our common stock) and its relative performance is tracked through December 31, 2023. Pursuant to
applicable Securities and Exchange Commission rules, all values assume reinvestment of the full amount of all dividends, however no dividends have been
declared on our common stock to date. The stockholder returns shown on the graph below are based on historical results and are not necessarily indicative
of future performance, and we do not make or endorse any predictions as to future stockholder returns.
Recent sales of unregistered securities
None.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved.]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated
financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, this
discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. As a result of many factors, including
those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results
described or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage precision oncology company developing novel targeted therapies for RAS-addicted cancers. We possess sophisticated
structure-based drug discovery capabilities built upon deep chemical biology and cancer pharmacology know-how and innovative, proprietary technologies
that enable the creation of small molecules tailored to unconventional binding sites. Guided by our understanding of genetic drivers and adaptive resistance
mechanisms in cancer, we deploy precision medicine approaches to inform innovative monotherapy and combination regimens.
Our research and development pipeline comprises RAS(ON) inhibitors that bind directly to RAS variants, which we refer to as RAS(ON)
Inhibitors, and RAS companion inhibitors that target key nodes in the RAS pathway or associated pathways, which we refer to as RAS Companion
Inhibitors. Our RAS(ON) Inhibitors are designed to be used as monotherapy, in combination with other RAS(ON) Inhibitors and/or in combination with
RAS Companion Inhibitors or other therapeutic agents. Our RAS Companion Inhibitors are designed primarily for combination treatment strategies
centered on our RAS(ON) Inhibitors.
RAS(ON) Inhibitors
Our RAS(ON) Inhibitors are based on our proprietary tri-complex technology platform, which enables a highly differentiated approach to
inhibiting the active, GTP-bound form of RAS, which we refer to as RAS(ON). We are developing a portfolio of compounds that we believe are the first
and only RAS(ON) Inhibitors to use this mechanism of action. We believe that direct inhibitors of RAS(ON) suppress cell growth and survival and are less
susceptible to adaptive resistance mechanisms recognized for RAS(OFF) Inhibitors. We are evaluating our RAS(ON) Inhibitors alone and in combination
with other drugs and investigational drug candidates, including with other RAS(ON) Inhibitors in RAS(ON) Inhibitor doublet regimens.
We are advancing a deep pipeline of RAS(ON) Inhibitors, including both our innovative RAS(ON) multi-selective inhibitor (RMC-6236) and a
series of mutant-selective inhibitors (led by RMC-6291 and RMC-9805). Together, we consider these three development-stage candidates as the first wave
of RAS(ON) inhibitors that we are advancing through clinical development.
RMC-6236
RMC-6236, our RAS(ON) multi-selective inhibitor, is designed as an oral, RAS-selective tri-complex inhibitor of multiple RAS(ON) variants
containing cancer driver mutations at all three of the major mutation hotspot positions, G12, G13, and Q61. RMC-6236 inhibits all three major RAS
isoforms, suppressing the mutant cancer driver and cooperating wild-type RAS proteins.
A monotherapy dose-escalation Phase 1/1b study of RMC-6236, which we refer to as the RMC-6236-001 study, is ongoing. On October 13,
2023, we reported updated interim safety, pharmacokinetic (PK) and circulating tumor DNA (ctDNA) data from the RMC-6236-001 study as of a
September 11, 2023 data cut-off date. These data demonstrated that RMC-6236 was generally well tolerated across dose levels in patients with solid
tumors. These data also demonstrated dose-dependent increases in exposure at a steady state with minimal accumulation after repeated daily oral dosing,
which we believe is compatible with once-daily dosing. Reductions in ctDNA variant allele frequency were observed for multiple KRAS-mutated alleles in
multiple tumor types, indicative of anti-tumor activity by RMC-6236.
On October 22, 2023, we reported updated interim safety and anti-tumor activity data for dose levels of 80 mg daily and above from the RMC-
6236-001 study as of an October 12, 2023 data cut-off date. These data demonstrated that RMC-6236 was generally well tolerated across the dose levels
analyzed as of the cut-off date. These data also demonstrated preliminary evidence of clinical activity in non-small cell lung cancer (NSCLC) patients and
pancreatic ductal adenocarcinoma (PDAC) patients.
On January 9, 2024, we reported that, with additional follow-up after the October 2023 data reports described above, the profile of RMC-6236
remained relatively consistent with the description in the October 2023 reports, the objective response rate (ORR) for both NSCLC and PDAC patients had
improved, and the disease control rate (DCR) remained consistent.
We currently expect to disclose updated clinical safety, tolerability and activity data from the RMC-6236-001 study for patients with NSCLC and
for patients with PDAC in the second half of 2024. We also currently expect to disclose initial data from
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Phase 1 expansion cohorts in the RMC-6236-001 study in tumor types beyond NSCLC and PDAC and genotypes beyond KRAS G12X in the second or
third quarter of 2024.
We are also evaluating RMC-6236 in a series of combination regimens. We are conducting an open-label Phase 1b/2 platform study evaluating
our RAS(ON) Inhibitors in combination with standard(s) of care in advanced NSCLC patients, which we refer to as the RMC-LUNG-101 study. There are
currently two ongoing subprotocols under RMC-LUNG-101, one evaluating our RAS(ON) G12C inhibitor, RMC-6291, which we refer to as the RMC-
LUNG-101A, and one evaluating RMC-6236, which we refer to as the RMC-LUNG-101B study. RMC-LUNG-101B is a Phase 1b/2 dose exploration and
dose expansion study evaluating RMC-6236 in combination with pembrolizumab, with or without chemotherapy, in patients with RAS-mutated NSCLC.
We currently expect to disclose initial clinical PK, safety, tolerability and activity data from the RMC-LUNG-101B study in the second half of 2024.
We are also conducting an open-label Phase 1b clinical trial of RMC-6291 in combination with RMC-6236, which we refer to as the RMC-6291-
101 study. This study is ongoing, and we currently expect to disclose initial clinical PK, safety, tolerability and activity data in the second half of 2024.
Planning is also underway for one or more combination clinical trials for RMC-6236 with standard of care therapies in first-line treatment
settings.
We are planning a global randomized Phase 3 trial comparing RMC-6236 against docetaxel in patients with RAS-mutated NSCLC who have
been treated with immunotherapy and platinum-containing chemotherapy. The study design for this planned trial is subject to change based on regulatory
authority feedback. We currently expect to initiate this study in the second half of 2024.
We are also planning a global randomized Phase 3 trial comparing RMC-6236 against a physician’s choice of chemotherapy regimens in patients
with previously treated RAS-mutated PDAC. The study design for this planned trial is subject to change based on regulatory authority feedback. We
currently expect to initiate this study in the second half of 2024.
RMC-6291
RMC-6291 is designed as a RAS(ON) oral tri-complex G12C-selective inhibitor. It is designed to exhibit subnanomolar potency for suppressing
RAS pathway signaling and growth of RAS G12C-bearing cancer cells and is engineered to be highly selective for RAS G12C over wild-type RAS and
other cellular targets. RMC-6291 is designed to be differentiated from first-generation KRAS(OFF) G12C inhibitors, which sequester the KRAS(OFF)
G12C form, by its mechanism of directly inhibiting the RAS(ON) G12C form.
A monotherapy dose-escalation Phase 1b study of RMC-6291, which we refer to as the RMC 6291-001 study, is ongoing.
On October 13, 2023, we reported interim preliminary safety and anti-tumor data from the RMC-6291-001 study as of an October 5, 2023 data
cut-off date. The data demonstrated that RMC-6291 was generally well tolerated across dose levels. These data also demonstrated preliminary evidence of
clinical activity in patients with KRAS G12C NSCLC previously treated with, or naïve to, a KRAS(OFF) G12C inhibitor and preliminary evidence of
clinical activity in patients with KRAS G12C colorectal cancer (CRC) who were naïve to treatment with a KRAS(OFF) G12C inhibitor. We observed that
RMC-6291 was orally bioavailable and demonstrated dose-dependent pharmacokinetics and that reduction in ctDNA of the KRAS G12C allele across
doses was correlated with clinical response. We believe these data provide preliminary evidence of clinically meaningful differentiation of RMC-6291 from
KRAS(OFF) G12C inhibitors.
On January 9, 2024, we reported that relative to the October 13, 2023 report, profile of RMC-6291 in the RMC-6291-001 study had remained
relatively stable. We continue dosing patients at a 200 mg BID dose.
As discussed above in the “RMC-6236” section, we are evaluating RMC-6291 in the RMC-LUNG-101A study, which is a Phase 1b/2 dose
exploration and dose expansion study evaluating RMC-6291 in combination with pembrolizumab, with or without chemotherapy, in patients with RAS-
mutated NSCLC. We currently expect to disclose initial clinical PK, safety, tolerability and activity data from the RMC-LUNG-101A study in the second
half of 2024.
As also discussed above in the “RMC-6236” section, we are conducting an open-label Phase 1/1b clinical trial of RMC-6291 in combination
with RMC-6236, which we refer to as the RMC-6291-101 study.
RMC-9805
RMC-9805 is designed as a RAS(ON) oral tri-complex G12D-selective inhibitor. It is designed to exhibit low nanomolar potency for suppressing
RAS pathway signaling and growth of RAS G12D-bearing cancer cells and is engineered to covalently inactivate RAS G12D irreversibly.
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A monotherapy dose-escalation Phase 1/1b trial of RMC-9805, which we refer to as the RMC-9805-001 study, is ongoing.
On January 9, 2024, we reported that, based on our observations of interim data from the RMC-9805-001 study, RMC-9805 demonstrated oral
bioavailability in patients, exhibiting PK consistent with expectations from preclinical data. We also reported that the compound had cleared several dose
levels and that we observed favorable tolerability results with no dose-limiting toxicities reported, and that a recommended Phase 2 dose and schedule was
not yet reached.
We currently expect to disclose initial clinical PK, safety, tolerability and activity data from the RMC-9805-001 study in the second half of 2024.
Additional RAS(ON) Inhibitors
Beyond this first wave of RAS(ON) Inhibitors, we have other RAS(ON) Inhibitor compounds currently in our research and development
pipeline, including the development candidates RMC-5127 (G12V), RMC-0708 (Q61H) and RMC-8839 (G13C). We are also pursuing pipeline expansion
programs focused on G12R and other targets.
RAS Companion Inhibitors
RMC-4630
Our RAS Companion Inhibitor RMC-4630 is designed as a potent and selective inhibitor of SHP2.
Amgen is currently evaluating RMC-4630 in a Phase 1b study in combination with Amgen’s KRAS(OFF) G12C agent sotorasib
(LUMAKRAS®) in Amgen’s CodeBreaK 101c study.
We and Sanofi, our former SHP2 development partner, sponsored several additional studies involving RMC-4630, all of which are being wound
down.
The combination of RMC-4630 with an ERK inhibitor in patients with pancreatic cancer is being evaluated as part of an investigator-sponsored
study by the Netherlands Cancer Institute.
We have no immediate plans for further development of RMC-4630, but we believe this compound remains an option for potential evaluation in
combination regimens.
RMC-5552
Our RAS Companion Inhibitor RMC-5552 is designed as a selective inhibitor of mTORC1 signaling in tumors. We are evaluating RMC-5552 as
a monotherapy in a Phase 1 study, which we refer to as the RMC-5552-001 study, and we may evaluate RMC-5552 in combination with RAS(ON)
Inhibitors for patients with cancers harboring a RAS mutation and co-occurring mutations in the mTOR signaling pathway.
We reported additional interim data from the ongoing dose-escalation portion of the RMC-5552-001 study in October 2023.
We are supplying RMC-5552 to the Regents of the University of California on behalf of its San Francisco campus (UCSF) for an investigator-
initiated Phase 1/1b trial by UCSF of RMC-5552 in patients with recurrent glioblastoma.
RMC-5845
Our RAS Companion Inhibitor RMC-5845 targets SOS1, a protein that plays a key role in converting RAS(OFF) to RAS(ON) in cells. RMC-
5845 is intended for select combination therapies for certain genetically defined tumors. This compound is ready for preparation of an IND application
based on our preclinical development. We have no plans for further development of RMC-5845 at this time based on our current understanding that it may
not offer an advantage over RMC-6236.
Acquisition of EQRx, Inc.
On November 9, 2023 (the Closing Date), we completed the acquisition of EQRx, Inc. (the EQRx Acquisition), pursuant to the Agreement and
Plan of Merger, dated as of July 31, 2023 (the Merger Agreement). Pursuant to the Merger Agreement, EQRx, LLC survived as our wholly owned
subsidiary.
On the Closing Date, each share of EQRx, Inc. common stock issued and outstanding immediately prior to the completion of the EQRx
Acquisition was converted into the right to receive 0.1112 shares of our common stock. Outstanding stock options,
88
restricted stock units and restricted stock awards of EQRx, Inc. were also converted into our common stock subject to the terms of the Merger Agreement.
We issued 54.8 million shares of our common stock and paid $4.0 million in taxes to satisfy statutory income tax withholding obligations in conjunction
with the EQRx Acquisition.
As a result of the EQRx Acquisition, we acquired approximately $1.1 billion in net cash, cash equivalents and marketable securities after deducting
estimated EQRx wind-down and transition costs.
For additional information regarding the terms of the EQRx Acquisition, see “Acquisitions” under Note 3, to our audited consolidated financial
statements included in Item 8 of this Annual Report on Form 10-K.
Collaboration agreement with Sanofi
In June 2018, we entered into the Sanofi Agreement with Aventis, Inc. (an affiliate of Sanofi) to research and develop SHP2 inhibitors, including
RMC-4630, for any indications. The Sanofi Agreement was assigned to Genzyme Corporation, a Sanofi affiliate, in December 2018. For the purposes of
this discussion, we refer to Genzyme Corporation as Sanofi. The Sanofi Agreement was terminated in June 2023.
Pursuant to the Sanofi Agreement, we granted Sanofi a worldwide, exclusive, sublicensable (subject to our consent in certain circumstances)
license under certain of our patents and know-how to research, develop, manufacture, use, sell, offer for sale, import and otherwise commercialize SHP2
inhibitors, including RMC-4630, for any and all uses, subject to our exercise of rights and performance of obligations under the Sanofi Agreement.
Under the Sanofi Agreement, we had primary responsibility for early clinical development of RMC-4630 pursuant to an approved development
plan. Sanofi was responsible to reimburse us for all internal and external costs and expenses to perform our activities under approved development plans,
except for costs and expenses related to the RMC-4630-03 study, for which Sanofi reimbursed us 50% of the costs and expenses.
Pursuant to the Sanofi Agreement, we received an upfront payment of $50.0 million from Sanofi in July 2018. The Sanofi Agreement included
obligations for Sanofi to make certain milestone payments and royalty payments, all of which expired on termination of the Sanofi Agreement.
Financial Operations Overview
Collaboration revenue
Collaboration revenue consisted of revenue under the Sanofi Agreement for our SHP2 program. We received a $50.0 million upfront payment from
Sanofi in July 2018 and received reimbursement for research and development services. The Sanofi Agreement was terminated in June 2023.
For further information on our revenue recognition policies, see “Note 2. Summary of significant accounting policies” in the “Notes to Consolidated
Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.
Research and development expenses
We substantially rely on third parties to conduct our preclinical studies, clinical trials and manufacturing. We estimate research and development
expenses based on estimates of services performed, and rely on third party contractors and vendors to provide us with timely and accurate estimates of
expenses of services performed to assist us in these estimates. Research and development expenses consist primarily of costs incurred for the development
of our product candidates and costs associated with identifying compounds through our discovery platform, which include:
•
•
•
•
•
expenses incurred under agreements with third-party contract organizations, investigative clinical trial sites that conduct research and
development activities on our behalf and consultants;
costs related to production of clinical and preclinical materials, including fees paid to contract manufacturers;
laboratory and vendor expenses related to the execution of discovery programs, preclinical and clinical trials;
employee-related expenses, which include salaries, benefits and stock-based compensation; and
facilities and other expenses, which include allocated expenses for rent and maintenance of facilities, depreciation and amortization expense,
information technology and other supplies.
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We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized
based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-
party service providers. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development
activities are deferred and recorded as prepaid assets. The prepaid amounts are then expensed as the related goods are delivered or as services are
performed.
Up to the termination date of the Sanofi Agreement, Sanofi was responsible to reimburse us for all internal and external costs and expenses to
perform our activities under approved development plans, except for 50% of the RMC-4630-03 study. These reimbursements from Sanofi are recorded as
collaboration revenue.
We expect our research and development expenses to increase for the foreseeable future as we continue to invest in discovering and developing
product candidates and advancing product candidates into later stages of development, which may include conducting larger clinical trials. The process of
conducting the necessary research and development and clinical trials to seek regulatory approval for product candidates is costly and time-consuming, and
the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our
research and development projects or clinical trials or if and to what extent we will generate revenue from the commercialization and sale of any of our
product candidates.
General and administrative expenses
General and administrative expenses consist primarily of personnel-related costs, consultants and professional services expenses, including legal,
audit, accounting and human resources services, insurance, allocated facilities and information technology costs, and other general operating expenses not
otherwise classified as research and development expenses. Personnel-related costs consist of salaries, benefits and stock-based compensation. Facilities
costs consist of rent, utilities and maintenance of facilities. We expect our general and administrative expenses to increase for the foreseeable future due to
anticipated increases in headcount and as a result of operating as a public company, including expenses related to compliance with the rules and regulations
of the Securities and Exchange Commission, the Nasdaq Global Select Market, investor relations activities and other administrative and professional
services.
Interest income
Interest income primarily consists of interest earned on and accretion of our cash equivalents and marketable securities.
Benefit from income taxes
Benefit from income taxes relates to net changes in the deferred tax liability associated with the Warp Drive acquisition resulting from changes in
the effective state tax rate and changes in our valuation allowance.
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Results of operations
Comparison of the years ended December 31, 2023 and 2022
Revenue:
Collaboration revenue
Total revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense), net:
Interest income
Interest and other expense
Change in fair value of warrant liability and contingent earn-out
shares
Total other income, net
Loss before income taxes
Benefit from income taxes
Net loss
Collaboration revenue
Years Ended December 31,
2023
2022
(in thousands)
Increase/
(decrease)
$
11,580 $
11,580
35,380 $
35,380
(23,800 )
(23,800 )
423,144
75,621
498,765
(487,185 )
253,073
40,586
293,659
(258,279 )
170,071
35,035
205,106
(228,906 )
47,482
(303 )
9,154
—
38,328
(303 )
115
47,294
(439,891 )
3,524
(436,367 ) $
—
9,154
(249,125 )
420
(248,705 ) $
115
38,140
(190,766 )
3,104
(187,662 )
$
Collaboration revenue consisted of revenue under the Sanofi Agreement, which terminated in June 2023. Collaboration revenue decreased by $23.8
million, or 67%, during the year ended December 31, 2023 compared to 2022. The decrease in collaboration revenue in 2023 was a result of lower
reimbursed expenses from Sanofi.
Research and development expenses
Research and development expenses increased by $170.1 million, or 67%, during the year ended December 31, 2023 compared to 2022. The
increase in research and development expenses during the year ended December 31, 2023 was primarily due to a $72.6 million increase in our RMC-6236
costs, primarily attributable to clinical trial and clinical supply manufacturing expenses as RMC-6236 commenced clinical trials at the end of the second
quarter of 2022; a $24.1 million increase in salaries and other employee-related expenses due to increased headcount to support our research and
development programs; a $17.0 million increase in our preclinical research portfolio costs; a $16.0 million increase in stock-based compensation including
$3.7 million in connection with the EQRx Acquisition; a $15.8 million increase in RMC-9805 costs, which commenced clinical trials in the third quarter of
2023; a $12.9 million increase in facilities and other allocated expenses as a result of higher rent, utilities and information technology expenses associated
with increased headcount; a $12.6 million increase in RMC-6291 costs, which commenced clinical trials in the third quarter of 2022; and a $8.2 million
increase in employee-related expenses in connection with the EQRx Acquisition; partially offset by a $9.0 million decrease in SHP2 costs.
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General and administrative expenses
General and administrative expenses increased by $35.0 million, or 86%, during the year ended December 31, 2023 compared to 2022. The increase
in general and administrative expenses during the year ended December 31, 2023 was primarily due to a $14.6 million increase in stock-based
compensation expense including $7.5 million in connection with the EQRx Acquisition; a $7.1 million increase in salaries and other employee-related
expenses due to increased headcount; a $6.1 million increase in employee-related expenses in connection with the EQRx Acquisition; a $3.2 million
increase in facilities and other allocated expenses as a result of higher rent, utilities and information technology expenses associated with increased
headcount; a $2.3 million increase in legal and accounting fees; and a $1.6 million increase in pre-commercial development expenses.
Interest income
Interest income increased by $38.3 million for the year ended December 31, 2023, compared to 2022 due to a larger cash, cash equivalents and
marketable securities balance and higher interest rates.
Benefit from income taxes
Tax benefit from income taxes was $3.5 million for the year ended December 31, 2023 and $0.4 million for the year ended December 31, 2022 and
related to a decrease in the effective state tax rate and the resulting impact on the deferred tax liabilities from the Warp Drive acquisition.
Comparison of the years ended December 31, 2022 and 2021
Revenue:
Collaboration revenue
Total revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense), net:
Interest income
Interest expense
Total interest income (expense), net
Loss before income taxes
Benefit from income taxes
Net loss
Collaboration revenue
Years Ended December 31,
2022
2021
(in thousands)
Increase/
(decrease)
$
35,380 $
35,380
29,390 $
29,390
5,990
5,990
253,073
40,586
293,659
(258,279 )
9,154
—
9,154
(249,125 )
420
(248,705 ) $
186,948
30,450
217,398
(188,008 )
929
(12 )
917
(187,091 )
—
(187,091 ) $
66,125
10,136
76,261
(70,271 )
8,225
12
8,237
(62,034 )
420
(61,614 )
$
Collaboration revenue consisted of revenue under the Sanofi Agreement, which is expected to terminate in 2023. As a result of the expected
termination of the agreement and development plan adjustments during the year, we revised our estimate of the accounting transaction price and increased
our percentage of completion under the agreements with Sanofi, which resulted in total cumulative catch-up adjustments that increased collaboration
revenue by $3.0 million for the year ended December 31, 2022.
In August 2021, we entered into a Letter Agreement with Sanofi to include RMC-4630-03 under the development plan for RMC-4630 and decided
to no longer enroll new patients in RMC-4630-02. As a result of these development plan adjustments, we revised the estimate of the accounting transaction
price and decreased our estimated percentage of completion under the agreements with Sanofi, and resulted in a cumulative catch-up adjustment that
reduced collaboration revenue by $8.5 million for the year ended December 31, 2021.
Collaboration revenue increased by $6.0 million, or 20%, during the year ended December 31, 2022 compared to the same period in 2021. The
increase was due to the cumulative catch-up adjustments resulting from the Sanofi Agreement termination and development plan adjustments, partially
offset by lower reimbursable SHP2 program research and development costs under the Sanofi Agreement for the year ended December 31, 2022.
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Research and development expenses
Research and development expenses increased by $66.1 million, or 35%, during the year ended December 31, 2022 compared to the same period in
2021. The increase in research and development expenses during the year ended December 31, 2022 was primarily due to a $16.1 million increase in third-
party costs for our preclinical research portfolio, primarily driven by higher chemistry contract research organization, material sourcing and manufacturing
costs; a $16.1 million increase in salaries and other employee-related expenses due to increased headcount to support our research and development
programs; a $14.8 million increase in RMC-6236 costs, which commenced clinical trials in the second quarter of 2022; a $10.2 million increase in facilities
and other allocated expenses as a result of higher rent, utilities and information technology expenses associated with increased headcount; a $6.3 million
increase in stock-based compensation; and a $5.2 million increase in RMC-6291 costs, which commenced clinical trials in the third quarter of 2022.
General and administrative expenses
General and administrative expenses increased by $10.1 million, or 33%, during the year ended December 31, 2022 compared to the same period in
2021. The increase in general and administrative expenses during the year ended December 31, 2022 was primarily due to an increase of $4.2 million in
stock-based compensation expense; an increase of $3.9 million in salaries and other employee-related expenses due to increased headcount; a $0.7 million
increase in facilities and other allocated expenses as a result of higher rent, utilities and information technology expenses associated with increased
headcount; and a $0.8 million increase in legal and accounting fees.
Interest income
Interest income increased by $8.2 million for the year ended December 31, 2022, compared to the same period in 2021 due to a larger cash, cash
equivalents and marketable securities balance and higher interest rates.
Benefit from income taxes
Benefit from income taxes was $0.4 million for the year ended December 31, 2022 and zero for the year ended December 31, 2021 and related to
net changes in the valuation allowance resulting from the Warp Drive acquisition.
Liquidity and capital resources
In February 2021, we issued 6,666,666 shares of our common stock in an underwritten public offering at a price to the public of $45.00 per share for
net proceeds of $281.1 million, after deducting underwriting discounts and commissions of $18.0 million and offering expenses of $0.9 million.
In November 2021, we entered into a sales agreement with Cowen and Company, LLC (Cowen) to sell shares of our common stock, from time to
time, with aggregate gross proceeds of up to $250.0 million, through an at-the-market equity offering program (ATM) under which Cowen agreed to act as
our sales agent. During the year ended December 31, 2021, we sold an aggregate of 339,302 shares of common stock under the ATM resulting in gross
proceeds to us of $10.4 million. After deducting commissions and expenses of $0.3 million, our net proceeds under the ATM were $10.1 million during the
year ended December 31, 2021. During the year ended December 31, 2022, we sold an aggregate of 2,385,846 shares of common stock under the ATM
resulting in gross proceeds to us of $51.3 million. After deducting commissions and expenses of $1.4 million, our net proceeds under the ATM were $49.9
million during the year ended December 31, 2022. During the year ended December 31, 2023, we sold an aggregate of 2,482,880 shares of common stock
under the ATM resulting in gross proceeds to us of $63.5 million. After deducting commissions and expenses of $1.4 million, our net proceeds under the
ATM were $62.1 million during the year ended December 31, 2023.
In July 2022, we issued 13,225,000 shares of our common stock in an underwritten public offering at a price to the public of $20.00 per share, for
net proceeds of $248.1 million, after deducting underwriting discounts and commissions of $15.9 million and estimated offering expenses of $0.5 million.
In March 2023, we issued 15,681,818 shares of our common stock in an underwritten public offering at a price to the public of $22.00 per share, for
net proceeds of $323.7 million, after deducting underwriting discounts and commissions of $20.7 million and expenses of $0.6 million.
In November 2023, we completed the EQRx Acquisition and issued 54,786,528 shares of common stock in a transaction in which we received
approximately $1.1 billion in net cash, cash equivalents and marketable securities after deducting estimated EQRx wind-down and transition costs.
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Our operations have been financed primarily by our public offerings of common stock, the EQRx Acquisition, net proceeds of $230.6 million from
the issuance of our preferred stock and $187.7 million received under the Sanofi Agreement for upfront payments and for research and development cost
reimbursement.
As of December 31, 2023, we had $1.9 billion in cash, cash equivalents and marketable securities.
As of December 31, 2023, we had an accumulated deficit of $1.1 billion. Our primary use of cash is to fund operating expenses, which consist
primarily of research and development expenditures related to our product candidates and our pre-clinical research portfolio, and to a lesser extent, general
and administrative expenditures. We expect our expenses to continue to increase in connection with our ongoing activities, particularly as we continue to
advance our product candidates and pre-clinical research portfolio.
We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our planned operations for at least 12 months
following the date of this report.
The timing and amount of our future funding requirements depends on many factors, including:
•
•
•
•
•
•
•
•
•
the scope, progress, results and costs of researching and developing our product candidates and programs, and of conducting preclinical
studies and clinical trials;
the timing of, and the costs involved in, obtaining marketing approvals for our product candidates if clinical trials are successful;
the cost of commercialization activities for any product candidates, whether alone or in collaboration, including marketing, sales and
distribution costs if any product candidate is approved for sale;
the cost of manufacturing our current and future product candidates for clinical trials in preparation for marketing approval and in preparation
for commercialization;
our ability to establish and maintain strategic licenses or other arrangements and the financial terms of such agreements;
the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs
and the outcome of such litigation;
the timing, receipt and amount of sales of, profit share or royalties on, our future products, if any;
the emergence of competing cancer therapies or other adverse market developments; and
any plans to acquire or in-license other programs or technologies.
We will need to obtain substantial additional funding in the future to continue the preclinical and clinical development of our current and future
programs and to prepare for their potential commercialization. If we need to raise additional capital to fund our operations, funding may not be available to
us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or
more of our clinical trials, research and development programs or commercialization efforts. We may seek to raise any necessary additional capital through
a combination of public or private equity offerings, debt financings, acquisitions, and collaborations or licensing arrangements. If we do raise additional
capital through public or private equity offerings or acquisitions using our common stock, the ownership interest of our existing stockholders will be
diluted, and the terms may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt
financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends, and if the debt is convertible into our common stock, the ownership interest of our stockholders may be diluted. If we
are unable to raise capital, we may need to delay, reduce or terminate planned activities to reduce costs. Doing so will likely harm our ability to execute our
business plans.
Cash flows
The following table summarizes our consolidated cash flows for the periods indicated:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net change in cash and cash equivalents
2023
Year Ended December 31,
2022
(in thousands)
2021
$
$
(350,572 ) $
(342,598 )
1,229,200
536,030
$
(224,401 ) $
(24,116 )
301,432
52,915 $
(147,180 )
(142,117 )
294,179
4,882
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Cash used in operating activities
During the year ended December 31, 2023, cash used in operating activities of $350.6 million was attributable to a net loss of $436.4 million
partially offset by $49.0 million in non-cash charges and by a net change of $36.8 million in our operating assets and liabilities. The non-cash charges
primarily consisted of stock-based compensation expense of $61.8 million, depreciation and amortization of $6.1 million, amortization of operating lease
right-of-use asset of $3.2 million, offset by net amortization of premium on marketable securities of $22.2 million. The change in operating assets and
liabilities was primarily due to a $2.6 million increase in prepaid expenses and other current assets, a $4.5 million decrease in deferred revenue associated
with the Sanofi Agreement, a $1.5 million decrease in operating lease liability, a $3.9 million decrease in deferred tax liability, a $1.4 million increase in
other noncurrent assets, offset by a $32.5 million increase in accounts payable, $14.7 million increase in accrued expenses and other current liabilities
primarily related to clinical trial and clinical supply manufacturing expenses and increased personnel related expenses due to increased headcount and a
$3.4 million decrease in accounts receivable.
During the year ended December 31, 2022, cash used in operating activities of $224.4 million was attributable to a net loss of $248.7 million and by
a net change of $13.5 million in our operating assets and liabilities partially offset by $37.8 million in non-cash charges. The non-cash charges primarily
consisted of stock-based compensation expense of $31.2 million, depreciation and amortization of $5.0 million, amortization of operating lease right-of-use
asset of $4.6 million offset by net amortization of premium on marketable securities of $3.1 million. The change in operating assets and liabilities was
primarily due to a $3.8 million increase in prepaid expenses and other current assets primarily resulting from the timing of prepayments made for research
and development activities, a $14.5 million decrease in deferred revenue associated with the Sanofi Agreement, a $2.4 million decrease in operating lease
liability, offset by a $7.3 million increase in accounts payable, $1.5 million increase in accrued expenses and other current liabilities and a $1.3 million
decrease in accounts receivable.
During the year ended December 31, 2021, cash used in operating activities of $147.2 million was attributable to a net loss of $187.1 million
partially offset by $31.2 million in non-cash charges and by a net change of $8.7 million in our operating assets and liabilities. The non-cash charges
primarily consisted of stock-based compensation expense of $20.7 million, depreciation and amortization of $4.2 million, net amortization of premium on
marketable securities of $3.0 million and amortization of operating lease right-of-use asset of $3.2 million. The change in operating assets and liabilities
was primarily due to an $11.0 million increase in accrued expenses and accounts payable partially offset by a $1.7 million decrease in deferred revenue
associated with the Sanofi Agreement and a $1.5 million decrease in operating lease liability.
Cash used in investing activities
During the year ended December 31, 2023, cash used in investing activities of $342.6 million was primarily comprised of purchases of marketable
securities of $1,058.9 million and purchases of property and equipment of $7.7 million, offset by cash provided by maturities of marketable securities of
$724.0 million.
During the year ended December 31, 2022, cash used in investing activities of $24.1 million was primarily comprised of purchases of marketable
securities of $612.8 million and purchases of property and equipment of $10.8 million, offset by cash provided by maturities of marketable securities of
$599.5 million.
During the year ended December 31, 2021, cash used in investing activities of $142.1 million was primarily comprised of purchases of marketable
securities of $671.3 million and purchases of property and equipment of $6.5 million, offset by cash provided by maturities of marketable securities of
$526.8 million and sale of marketable securities of $9.0 million.
95
Cash provided by financing activities
During the year ended December 31, 2023, cash provided by financing activities of $1,229.2 million was comprised of $840.8 million of cash, cash
equivalents and restricted cash acquired, net of $20.7 million transaction costs in connection with the EQRx Acquisition, $323.7 million in net proceeds
from the March 2023 underwritten public offering, $62.1 million in net proceeds from the issuance of common stock under the ATM, $3.3 million in
proceeds from the issuance of common stock under the employee stock purchase plan and $3.3 million in proceeds from the issuance of common stock
upon the exercise of stock options, offset by $4.0 million in tax payments in satisfaction of withholding tax requirements pursuant to the EQRx Acquisition.
During the year ended December 31, 2022, cash provided by financing activities of $301.4 million was comprised of $248.1 million in net proceeds
from the July 2022 underwritten public offering, $49.9 million in net proceeds from the issuance of common stock under the ATM, $1.9 million in proceeds
from the issuance of common stock under the employee stock purchase plan and $1.5 million in proceeds from the issuance of common stock upon the
exercise of stock options.
During the year ended December 31, 2021, cash provided by financing activities of $294.2 million was comprised of $281.1 million in net proceeds
from the issuance of common stock related from the February 2021 underwritten public offering, $10.1 million in net proceeds from the issuance of
common stock under the ATM, $1.9 million in proceeds from the issuance of common stock under the employee stock purchase plan and $1.5 million in
proceeds from the issuance of common stock upon the exercise of stock options.
Contractual obligations and commitments
We have contractual obligations related to office and laboratory space leases in Redwood City, California, described in “Note 7. Commitments and
contingencies” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.
We enter into agreements in the ordinary course of business with contract research organizations for clinical trials, contract manufacturing
organizations to provide clinical trial materials and with vendors for preclinical studies and other services and products for operating purposes which are
generally cancelable at any time by us upon 30 to 90 days prior written notice.
Indemnification agreements
We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold
harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret,
copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification
agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required
to make under these arrangements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification
agreements. As a result, we believe the fair value of these agreements is minimal.
Critical accounting policies, significant judgments and use of estimate
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements,
which have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The preparation of these consolidated
financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our
estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding
our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Revenue recognition
We recognize revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which such entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as we
fulfill our obligations under arrangements, we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v)
recognize revenue when (or
96
as) the entity satisfies the performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the
goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is
distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the
performance obligation is satisfied.
We enter into collaboration agreements under which we may obtain upfront license fees, research and development funding, and development,
regulatory and commercial milestone payments and royalty payments. Our performance obligations under these arrangements may include licenses of
intellectual property, sales and distribution rights, research and development services, delivery of manufactured product and/or participation on joint
steering committees.
Licenses of intellectual property: If the license to our intellectual property is determined to be distinct from the other performance obligations
identified in the arrangement, we recognize revenue from upfront license fees allocated to the license when the license is transferred to the customer and
the customer is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the
combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time,
the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the
measure of proportional performance each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
Research, development and regulatory milestone payments: At the inception of each arrangement that includes research, development, or regulatory
milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the
transaction price. We use the most likely amount method for research, development and regulatory milestone payments. Under the most likely amount
method, an entity considers the single most likely amount in a range of possible consideration amounts. If it is probable that a significant revenue reversal
would not occur, the associated milestone value is included in the transaction price.
Sales-based milestones and royalties: For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in
which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, we recognize revenue in the period in
which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur. To date, we have not recognized any
sales-based milestone or royalty revenue resulting from our collaboration arrangements.
The transaction price for each collaboration agreement is determined based on the amount of consideration we expect to be entitled for satisfying all
performance obligations within the agreement. Significant judgment may be required in determining the amount of variable consideration to be included in
the transaction price. We use the most likely amount method to determine variable consideration and will re-evaluate the transaction price in each reporting
period and as uncertain events are resolved or other changes in circumstances occur.
Revenue is recognized based on actual costs incurred as a percentage of total estimated costs to be incurred over the performance obligation as we
fulfill our performance obligations. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our
performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative
effect of revisions to estimated costs to fulfill our performance obligations will be recorded in the period in which changes are identified and amounts can
be reasonably estimated.
Accrued research and development expenses
We record accrued expenses for estimated preclinical studies and clinical trial expenses. Estimates are based on the services performed pursuant to
contracts with research institutions and contract research organizations and clinical manufacturing organizations that conduct and manage preclinical
studies and clinical trials on our behalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on
the level of patient enrollment and activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent
reasonably possible and make judgments and estimates in determining the accrued balance in each reporting period. If we underestimate or overestimate
the level of services performed or the costs of these services, our actual expenses could differ from our estimates. To date, we have not experienced
significant changes in our estimates of preclinical studies and clinical trial accruals.
Stock-based compensation
We maintain an equity incentive plan as a long-term incentive for employees, consultants and members of our board of directors. The plan allows
for the issuance of non-statutory options (NSOs), incentive stock options (ISOs), restricted stock unit awards (RSUs )to employees and NSOs and RSUs to
nonemployees.
97
Stock-based compensation is measured using estimated grant date fair value and recognized as compensation expense over the service period in
which the awards are expected to vest. The grant date fair value of an RSU award is based on our stock price on the date of grant. For options, we estimate
the grant date fair value, and the resulting stock-based compensation, using the Black-Scholes option-pricing model, and we use the straight-line method
for expense attribution. The Black-Scholes model requires us to make assumptions and judgments about the variables used in the calculations, including the
expected term (weighted-average period of time that the options granted are expected to be outstanding), the expected volatility of our common stock, the
related risk-free interest rate and the expected dividend. We have elected to recognize forfeitures of stock-based awards as they occur.
The Black-Scholes option-pricing model requires the use of highly subjective assumptions to determine the fair value of stock-based awards. These
assumptions include:
•
•
•
•
Expected Term—The expected term is calculated using the simplified method, which is available where there is insufficient historical data
about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the
contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the
maximum contractual expiration date is used as the expected term under this method.
Expected Volatility—Given that we do not have sufficient trading history for our common stock, the expected volatility was estimated based
on the average volatility of the Company and comparable publicly traded biotechnology companies over a period equal to the expected term
of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty.
Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods
corresponding with the expected term of the option.
Expected Dividend—We have never paid dividends on our common stock and have no plans to pay dividends on our common stock.
Therefore, we used an expected dividend yield of zero.
Recent accounting pronouncements
For a description of the expected impact of recent accounting pronouncements, see “Note 2. Summary of significant accounting policies” in the
“Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest rate risk
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. The primary objective
of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming
significant risk. To achieve our objectives, we maintain a portfolio of investments in a variety of securities of high credit quality and short-term duration,
invested in compliance with our policy.
We held cash, cash equivalents and marketable securities of $1.9 billion and $644.9 million as of December 31, 2023 and December 31, 2022,
respectively, which consisted of bank deposits, money market funds, U.S. government debt securities, U.S. government agency bonds, commercial paper
and corporate bonds. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been
significant for us. Due to the short-term maturities of our cash equivalents and marketable securities, an immediate one percent change in interest rates
would not have a material effect on the fair value of our cash equivalents and marketable securities.
Foreign currency risk
Our expenses are generally denominated in U.S. dollars. However, we have entered into a limited number of contracts with vendors for research and
development services with payments denominated in foreign currencies, including the Euro, British Pound and Chinese Yuan. We are subject to foreign
currency transaction gains or losses on our contracts denominated in foreign currencies. To date, foreign currency transaction gains and losses have not
been material to our consolidated financial statements, and we have not had a formal hedging program with respect to foreign currency. A 10% increase or
decrease in current exchange rates would not have a material effect on our financial results.
Item 8. Financial Statements and Supplementary Data.
98
REVOLUTION MEDICINES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
99
Page
100
102
103
104
105
106
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Revolution Medicines, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Revolution Medicines, Inc. and its subsidiaries (the “Company”) as of December 31,
2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for each of the
three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also
have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over
Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the
Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
100
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for the Acquisition of EQRx, Inc.
As described in Note 3 to the consolidated financial statements, on November 9, 2023, the Company completed the acquisition of EQRx, Inc. (the EQRx
Acquisition) pursuant to the Agreement and Plan of Merger, dated as of July 31, 2023, with EQRx, LLC surviving as a wholly owned subsidiary of the
Company. The EQRx Acquisition provided the Company with additional financing through the acquisition of EQRx’s cash, cash equivalents, and
marketable securities, which comprised the majority of the net assets acquired from EQRx. As the Company primarily acquired these monetary assets, the
EQRx Acquisition was accounted for as a capital-raising transaction with an asset acquisition component. The total purchase price was $1,089.7 million.
The principal considerations for our determination that performing procedures relating to the accounting for the acquisition of EQRx, Inc. is a critical audit
matter are i) the significant judgment by management in determining the appropriate accounting treatment for the EQRx Acquisition and ii) a high degree
of auditor judgment and effort in performing procedures and evaluating audit evidence related to management’s accounting treatment for the EQRx
Acquisition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included testing the effectiveness of controls over management’s determination of the accounting treatment for the
EQRx Acquisition. These procedures also included, among others, (i) reading the Agreement and Plan of Merger; (ii) evaluating management’s conclusions
related to the accounting for the EQRx Acquisition as a capital-raising transaction with an asset acquisition component; and (iii) evaluating the sufficiency
of the disclosures in the consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 26, 2024
We have served as the Company’s auditor since 2017.
101
REVOLUTION MEDICINES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use asset
Intangible assets, net
Goodwill
Restricted cash
Other noncurrent assets
Total assets
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Operating lease liability, current
Deferred revenue, current
Total current liabilities
Deferred tax liability
Operating lease liability, noncurrent
Warrant liability
Other noncurrent liabilities
Total liabilities
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at
December 31, 2023 and December 31, 2022, respectively; none
issued and outstanding at December 31, 2023 and December 31, 2022, respectively
Common stock, $0.0001 par value; 300,000,000 shares authorized as of
December 31, 2023 and December 31, 2022, respectively; 170,234,594 and 90,411,912
shares issued as of December 31, 2023 and December 31, 2022; 164,674,594 and 90,411,912 shares
outstanding as of December 31, 2023 and December 31, 2022, respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
December 31,
2023
December 31,
2022
$
$
$
696,148 $
1,156,807
1,254
25,072
1,879,281
22,865
77,149
57,739
14,608
3,031
7,032
2,061,705 $
61,788 $
74,694
7,369
—
143,851
3,115
80,575
6,512
1,458
235,511
161,412
483,531
4,673
10,569
660,185
18,659
55,077
58,807
14,608
1,737
2,857
811,930
21,306
29,446
6,773
4,459
61,984
7,025
57,432
—
301
126,742
—
—
16
2,963,342
544
(1,137,708 )
1,826,194
2,061,705 $
9
1,388,300
(1,780 )
(701,341 )
685,188
811,930
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
102
REVOLUTION MEDICINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
2023
Year Ended December 31,
2022
2021
Revenue:
Collaboration revenue
Total revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense), net:
Interest income
Interest and other expense
Change in fair value of warrant liability and contingent earn-out shares
Total other income, net
Loss before income taxes
Benefit from income taxes
Net loss
Net loss per share attributable to common stockholders, basic and diluted
$
$
$
11,580 $
11,580
35,380 $
35,380
423,144
75,621
498,765
(487,185 )
47,482
(303 )
115
47,294
(439,891 )
3,524
(436,367 ) $
(3.86 ) $
253,073
40,586
293,659
(258,279 )
9,154
—
—
9,154
(249,125 )
420
(248,705 ) $
(3.08 ) $
29,390
29,390
186,948
30,450
217,398
(188,008 )
929
(12 )
—
917
(187,091 )
—
(187,091 )
(2.57 )
Weighted-average common shares used to compute net loss per share, basic and
diluted
113,149,869
80,626,525
72,806,079
Comprehensive loss:
Net loss
Other comprehensive income (loss):
Unrealized gain (loss) on investments, net
Comprehensive loss
$
(436,367 ) $
(248,705 ) $
(187,091 )
$
2,324
(434,043 ) $
(1,404 )
(250,109 ) $
(492 )
(187,583 )
The accompanying notes are an integral part of these Consolidated Financial Statements.
103
REVOLUTION MEDICINES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
Accumulated
Additional
Other
Paid-in
Capital
Comprehensive Accumulated
Income/ (Loss)
Deficit
Common Stock
Amount
$
Shares
66,599,748
388,695
75,991
78,010
—
(5,793 )
Balance at December 31, 2020
Issuance of common stock pursuant to stock option exercises
Issuance of common stock related to employee stock purchase plan
Issuance of common stock related to vesting of restricted stock units
Vesting of early exercised stock options
Repurchases of early exercised stock
Issuance of common stock from follow-on public offering, net of offering costs of $18,855
Issuance of common stock from at-the-market offering
Stock-based compensation expense
Net unrealized loss on marketable securities
Net loss
Balance at December 31, 2021
Issuance of common stock pursuant to stock option exercises
Issuance of common stock from follow-on public offering, net of offering costs of $16,374
Issuance of common stock related to vesting of restricted stock units
Issuance of common stock related to employee stock purchase plan
Issuance of common stock from at-the-market offering
Repurchases of early exercised stock
Vesting of early exercised stock options
Stock-based compensation expense
Net unrealized loss on marketable securities
Net loss
Balance at December 31, 2022
Issuance of common stock pursuant to stock option exercises
Issuance of common stock from follow-on public offering, net of offering costs of $21,294
Issuance of common stock in connection with acquisition of EQRx, Inc., net of transaction costs
of $20,717
Issuance of common stock from at-the-market offering
Issuance of common stock related to vesting of restricted stock units
Issuance of common stock related to employee stock purchase plan
Repurchases of early exercised stock
Stock-based compensation expense
Net unrealized gain on marketable securities
Net loss
Balance at December 31, 2023
6,666,666
339,302
—
—
—
74,142,619
249,544
13,225,000
278,848
130,327
2,385,846
$
(272 )
—
—
—
—
90,411,912
524,094
15,681,818
$
54,786,528
2,482,880
576,974
210,679
(291 )
—
—
—
164,674,594
$
7
—
—
—
—
—
1
—
—
—
—
8
—
1
—
—
—
—
—
—
—
—
9
—
2
5
—
—
—
—
—
—
—
16
$
740,098
1,487
1,875
—
148
—
281,144
10,096
20,724
—
—
$ 1,055,572
1,481
248,125
—
1,864
49,919
—
143
31,196
—
—
$ 1,388,300
3,316
323,704
1,120,880
62,053
—
3,317
—
61,772
—
—
$ 2,963,342
$
$
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
104
(265,545 ) $
—
—
—
—
—
—
—
—
—
(187,091 )
(452,636 ) $
—
—
—
—
—
—
—
—
(248,705 )
(701,341 ) $
—
—
—
—
—
—
—
—
—
Total
Stockholders'
Equity
474,676
1,487
1,875
—
148
—
281,145
10,096
20,724
(492 )
(187,091 )
602,568
1,481
248,126
—
1,864
49,919
—
143
31,196
(1,404 )
(248,705 )
685,188
3,316
323,706
1,120,885
62,053
—
3,317
—
61,772
2,324
(436,367 )
1,826,194
$
116
—
—
—
—
—
—
—
—
(492 )
—
(376 ) $
—
—
—
—
—
—
—
—
(1,404 )
—
(1,780 ) $
—
—
—
—
—
—
—
—
2,324
—
544
(436,367 )
(1,137,708 ) $
$
REVOLUTION MEDICINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
2023
Year Ended December 31,
2022
2021
$
(436,367 )
$
(248,705 ) $
(187,091 )
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of fixed assets
Amortization of intangible assets
Stock-based compensation expense
Depreciation
Change in fair value of warrant liability and contingent earn-out shares
Net amortization of premium or discount on marketable securities
Amortization of operating lease right-of-use asset
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue
Operating lease liability
Deferred tax liability
Other noncurrent assets
Other noncurrent liabilities
Net cash used in operating activities
Cash flows from investing activities
Purchases of marketable securities
Maturities of marketable securities
Sales of marketable securities
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Cash, cash equivalents and restricted cash acquired in connection with EQRx Acquisition, net of
transaction costs
Proceeds from issuance of common stock, net of issuance costs
Proceeds from issuance of common stock from at-the-market offering, net of transaction costs
Proceeds from issuance of common stock under equity incentive plans
Proceeds from issuance of common stock related to employee stock purchase plan
Tax payment for common stock withheld in satisfaction of withholding tax requirements
Payments of deferred offering costs
Net cash provided by financing activities
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash - beginning of year
Cash, cash equivalents and restricted cash - end of year
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets
Cash and cash equivalents
Restricted cash
Cash, cash equivalents and restricted cash - end of period
Supplemental disclosure of non-cash investing and financing activities
Issuance of common stock for EQRx acquisition
Fair value of net assets acquired in connection with EQRx Acquisition
EQRx acquisition transaction costs incurred but not paid
Vesting of early exercised options and restricted stock
Purchases of property and equipment in accounts payable and accrued expenses and other current
liabilities
Advance payments for property and equipment
Right-of-use assets obtained in exchange for operating lease liabilities
Unpaid/deferred offering costs
2,611
180
25,271
2
The accompanying notes are an integral part of these Consolidated Financial Statements.
105
52
1,068
61,772
5,042
115
(22,205 )
3,199
3,419
(2,646 )
32,469
14,668
(4,459 )
(1,532 )
(3,910 )
(1,414 )
157
(350,572 )
(1,058,916 )
724,047
—
(7,729 )
(342,598 )
840,834
323,706
62,053
3,316
3,317
(4,026 )
—
1,229,200
536,030
163,149
699,179
696,148
3,031
699,179
1,085,676
291,475
100
—
$
$
$
$
$
$
19
1,069
31,196
3,972
—
(3,078 )
4,615
1,256
(3,779 )
7,288
1,502
(14,472 )
(2,428 )
(419 )
(2,247 )
(190 )
(224,401 )
(612,769 )
599,469
—
(10,816 )
(24,116 )
—
248,126
49,919
1,481
1,864
—
42
301,432
52,915
110,234
163,149 $
161,412
1,737
163,149 $
— $
—
—
143
1,419
82
—
2
119
1,069
20,724
3,083
—
3,012
3,180
464
198
2,239
8,720
(1,661 )
(1,468 )
—
81
151
(147,180 )
(671,335 )
526,754
8,992
(6,528 )
(142,117 )
—
281,145
10,096
1,487
1,875
—
(424 )
294,179
4,882
105,352
110,234
108,497
1,737
110,234
—
—
—
149
1,129
—
35,437
110
REVOLUTION MEDICINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Revolution Medicines, Inc. (the Company) is a clinical-stage precision oncology company focused on developing targeted therapies for RAS-
addicted cancers. The Company was founded in October 2014 and is headquartered in Redwood City, California.
Liquidity
The Company has incurred net operating losses in each year since inception. As of December 31, 2023, the Company had an accumulated deficit of
$1.1 billion. Management believes that its existing cash, cash equivalents and marketable securities will enable the Company to fund its planned operations
for at least 12 months following the issuance date of these consolidated financial statements. The Company has been able to fund its operations through the
issuance and sale of common stock and redeemable convertible preferred stock, the acquisition of EQRx, Inc. (EQRx), and upfront payments and research
and development cost reimbursements received under the Company’s collaboration agreement with Genzyme Corporation, an affiliate of Sanofi. Future
capital requirements will depend on many factors, including the timing and extent of spending on research and development. There can be no assurance
that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all. Failure to
generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending should additional capital not become available
could have a material adverse effect on the Company’s ability to achieve its business objectives.
Public offerings
In February 2021, the Company issued and sold 6,666,666 shares of its common stock in an underwritten public offering at a price of $45.00 per
share (including the exercise in full by the underwriters of their option to purchase an additional 869,565 shares of its common stock) for net proceeds of
$281.1 million, after deducting underwriting discounts and commissions of $18.0 million and expenses of $0.9 million.
In November 2021, the Company entered into a sales agreement with Cowen and Company, LLC (Cowen) to sell shares of its common stock, from
time to time, with aggregate gross proceeds of up to $250 million, through an at-the-market equity offering program (ATM). During the year ended
December 31, 2021, the Company sold an aggregate of 339,302 shares of common stock under the ATM resulting in gross proceeds of $10.4 million. After
deducting commissions and expenses of $0.3 million, net proceeds to the Company for the year ended December 31, 2021 were $10.1 million. During the
year ended December 31, 2022, the Company sold an aggregate of 2,385,846 shares of common stock under the ATM resulting in gross proceeds of $51.3
million. After deducting commissions and expenses of $1.4 million, net proceeds to the Company for the year ended December 31, 2022 were $49.9
million. During the year ended December 31, 2023, the Company sold an aggregate of 2,482,880 shares of common stock under the ATM resulting in gross
proceeds to the Company of $63.5 million. After deducting commissions and expenses of $1.4 million, net proceeds to the Company under the ATM were
$62.1 million during the year ended December 31, 2023.
In July 2022, the Company issued and sold 13,225,000 shares of its common stock in an underwritten public offering (including the exercise in full
by the underwriters of their option to purchase an additional 1,725,000 shares of the Company’s common stock) at a price to the public of $20.00 per share,
for net proceeds of $248.1 million, after deducting underwriting discounts and commissions of $15.9 million and expenses of $0.5 million.
In March 2023, the Company issued and sold 15,681,818 shares of its common stock in an underwritten public offering (including the exercise in
full by the underwriters of their option to purchase an additional 2,045,454 shares of the Company’s common stock) at a price to the public of $22.00 per
share, for net proceeds of $323.7 million, after deducting underwriting discounts and commissions of $20.7 million and expenses of $0.6 million.
2. Summary of significant accounting policies
Basis of presentation
The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (GAAP)
and applicable rules of the Securities and Exchange Commission (SEC) regarding financial reporting and, in the opinion of management, include all
normal and recurring adjustments which are necessary to state fairly the Company’s financial position and results of operations for the reported periods.
The consolidated financial statements for the years ended December 31, 2023, 2022 and 2021 include the accounts of the Company and its wholly owned
subsidiaries, EQRx, LLC and Warp Drive Bio, Inc.
106
(Warp Drive). All intercompany balances and transactions have been eliminated in consolidation. The functional and reporting currency of the Company
and its subsidiaries is the U.S. dollar.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to
accounting for acquisitions including the fair value of assets acquired and liabilities assumed and related purchase price allocation, revenue recognition,
clinical accruals, valuation of in-process research and development and developed technologies, income taxes, useful lives of property and equipment and
intangible assets, impairment of goodwill and intangibles, the incremental borrowing rate for determining operating lease assets and liabilities, and stock-
based compensation. Estimates are based on historical experience, complex judgments, facts and circumstances available at the time and various other
assumptions that are believed to be reasonable under the circumstances but are inherently uncertain and unpredictable. Actual results could materially differ
from the Company’s estimates, and there may be changes to the estimates in future periods.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less at the date of purchase to be cash
equivalents. Cash equivalents consist of amounts invested in money market funds, commercial paper and corporate bonds with original maturities of three
months or less at the date of purchase.
Marketable securities
Investments in marketable securities primarily consist of U.S. government debt securities, U.S. government agency bonds, commercial paper, and
corporate bonds. The Company has classified its marketable securities as available-for-sale and may sell these securities prior to their stated maturities. The
Company views these marketable securities as available to support current operations and classifies marketable securities with maturities beyond 12
months as current assets. The Company’s investments in marketable securities are carried at estimated fair value, which is derived from independent
pricing sources based on quoted prices in active markets for similar securities. Unrealized gains and losses are reported as a component of accumulated
other comprehensive income (loss). The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to
maturity, which is included in interest income on the consolidated statements of operations and comprehensive loss. Realized gains and losses are included
in interest income on the consolidated statements of operations and comprehensive loss.
The Company periodically evaluates its investments to assess whether those with unrealized loss positions are other than temporarily impaired. The
Company considers various factors in determining whether to recognize an impairment charge. If the Company determines that the decline in an
investment’s fair value is other-than-temporary, the difference is recognized as an impairment loss in the consolidated statements of operations and
comprehensive loss. As of December 31, 2023, no other-than-temporary-impairment has been recorded.
Restricted cash
As of December 31, 2023 and 2022, the Company had $3.0 million and $1.7 million, respectively, of noncurrent restricted cash related to Company
issued letters of credit in connection with leases. These amounts are held in separate bank accounts to support letter of credit agreements for certain of its
leases.
Concentration of credit risk and other risks and uncertainties
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities.
The Company invests in money market funds, U.S. government debt securities, U.S. government agency bonds, commercial paper and corporate bonds.
The Company maintains bank deposits in federally insured financial institutions and these deposits may exceed federally insured limits. The Company is
exposed to credit risk in the event of a default by the financial institutions holding its bank deposits and issuers of its investments. The Company’s
investment policy limits investments to money market funds, certain types of debt securities issued by the U.S. government and its agencies, corporate debt
and commercial paper, and places restrictions on the credit ratings, maturities and concentration by type and issuer. The Company has not experienced any
significant losses on its deposits of cash and cash equivalents or investments.
107
Fair value measurement
The carrying amounts of the Company’s certain financial instruments, including cash equivalents, accounts payable and accrued expenses and other
current liabilities approximate fair value due to their relatively short maturities and market interest rates, if applicable. For more information, refer to Note
4 regarding the fair value of the Company’s available-for-sale securities.
Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment
associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price
that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of
unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value
measurements as follows:
Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include
quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not
active; and
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets, which is generally three to five years. Leasehold improvements are amortized using the straight-line method
over the shorter of the assets’ estimated useful lives or the remaining term of the lease. Maintenance and repairs are charged to operations as incurred.
Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or
loss is reflected in the consolidated statement of operations.
Useful lives of property and equipment are as follows:
Property and equipment
Laboratory equipment
Leasehold improvements
Computer equipment and software
Furniture and fixtures
Leases
Estimated useful life
4-5 years
Lesser of estimated useful life or remaining lease term
3 years
5 years
The Company determines if an arrangement is, or contains, a lease at inception and then classifies the lease as operating or financing based on the
underlying terms and conditions of the contract. Leases with terms greater than one year are initially recognized on the balance sheet as right-of-use assets
and lease liabilities based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not
readily determinable. As such, the Company utilizes the incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis, an
amount equal to the lease payments over a similar term and in a similar economic environment of the applicable country or region. Variable lease payments
are excluded from the right-of-use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is
incurred. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets.
Impairment of long-lived assets
Long-lived assets are reviewed for indications of possible impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable. Recoverability is measured by comparison of the carrying amounts of the asset group to the
future undiscounted cash flows attributable to these assets. An impairment loss is recognized to the extent an asset group is not recoverable, and the
carrying amount exceeds the projected discounted future cash flows arising from these assets. There were no impairments of long-lived assets for any of the
periods presented.
108
Acquired intangible assets
Indefinite-lived intangible assets represent the estimated fair value assigned to in-process research and development (IPR&D) acquired in a business
combination. The Company reviews indefinite-lived intangible assets for impairment at least annually or more frequently if events or changes in
circumstances indicate that the carrying value of the assets might not be recoverable. If the carrying value of an indefinite-lived intangible asset exceeds its
fair value, then it is written down to its adjusted fair value. As of December 31, 2023, there have been no such impairments. For IPR&D, if a product
candidate derived from the indefinite-lived intangible asset is developed and commercialized, the useful life will be determined, and the carrying value will
be amortized prospectively over that estimated useful life. Alternatively, if a product candidate is abandoned, the carrying value of the intangible asset will
be charged to research and development expenses in the consolidated statements of operations and comprehensive loss.
Finite-lived intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair
value at the acquisition date and are carried at cost less accumulated amortization and impairment. Amortization is computed using the straight-line method
over the estimated useful lives of the respective finite-lived intangible assets and is included in research and development expenses in the consolidated
statement of operations. Intangible assets are reviewed for impairment at least annually or more frequently if indicators of potential impairment exist. As of
December 31, 2023, no such impairment has been recorded.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired in a business
combination. The Company reviews goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the
carrying value of goodwill may not be recoverable. Goodwill is tested for impairment at the reporting unit level by first assessing the qualitative factors to
determine whether it is more likely than not that the fair value of the Company’s single reporting unit is less than its carrying amount. Qualitative indicators
assessed include consideration of macroeconomic, industry and market conditions, the Company’s overall financial performance and personnel or strategy
changes. Based on the qualitative assessment, if it is determined that it is more likely than not that its fair value is less than its carrying amount, the fair
value of the Company’s single reporting unit is compared to its carrying value. Any excess of the goodwill carrying amount over the fair value is
recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. As of December 31, 2023, no goodwill impairment has
been identified.
Warrants
Warrants assumed as part of the EQRx transaction as described in Note 3 contain provisions that require them to be classified as derivative liabilities
in accordance with Accounting Standards Codification Topic 815, Derivatives and Hedging (ASC 815). Accordingly, at the end of each reporting period,
changes in fair value during the period are recognized as a change in fair value of warrant liabilities within the consolidated statements of operations and
comprehensive loss. The Company adjusts the warrant liability for changes in the fair value until the earlier of (a) the exercise or expiration of the warrants
or (b) the redemption of the warrants, at which time the warrants will be reclassified to additional paid-in capital.
Derivative warrant liabilities are classified as non-current liabilities, as their liquidation is not reasonably expected to require the use of current
assets or require the creation of current liabilities.
Revenue recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company
determines are within the scope of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), the Company
performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company
satisfies a performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the
goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service
is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or
as) the performance obligation is satisfied.
The Company enters into collaboration agreements under which it may obtain upfront license fees, research and development funding, and
development, regulatory and commercial milestone payments and royalty payments. The Company’s performance
109
obligations under these arrangements may include licenses of intellectual property, sales and distribution rights, research and development services,
delivery of manufactured product and/or participation on joint steering committees.
Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance
obligations identified in the arrangement, the Company recognizes revenue from upfront license fees allocated to the license when the license is transferred
to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes
judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or
at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-
refundable, upfront fees. The Company evaluates the measure of proportional performance each reporting period and, if necessary, adjusts the measure of
performance and related revenue recognition.
Research, development and regulatory milestone payments: At the inception of each arrangement that includes research, development, or regulatory
milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in
the transaction price. The Company uses the most likely amount method for research, development and regulatory milestone payments. Under the most
likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. If it is probable that a significant
revenue reversal would not occur, the associated milestone value is included in the transaction price.
Sales-based milestones and royalties: For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in
which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, the Company recognizes revenue in the
period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur. To date, the Company has not
recognized any sales-based milestone or royalty revenue resulting from its collaboration arrangements.
Deferred revenue represents amounts received by the Company for which the related revenues have not been recognized because one or more of the
revenue recognition criteria have not been met. The current portion of deferred revenue represents the amount to be recognized within one year from the
balance sheet date based on the estimated performance period of the underlying performance obligation. The noncurrent portion of deferred revenue
represents amounts to be recognized after one year through the end of the performance period of the performance obligation.
Research and development expenditures
Research and development expenses consist of costs incurred for the Company’s own and for collaborative research and development activities.
Research and development costs are expensed as incurred. Research and development costs consist of salaries and benefits, including associated stock-
based compensation, and laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and development activities
on the Company’s behalf. The Company estimates preclinical studies and clinical trial expenses based on the services performed pursuant to contracts with
research institutions, contract research organizations and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials
on the Company’s behalf based on actual time and expenses incurred by them. Further, the Company accrues expenses related to clinical trials based on the
level of patient activity according to the related agreement. The Company monitors patient enrollment levels and related activity to the extent reasonably
possible and adjusts estimates accordingly.
Stock-based compensation
The Company measures its stock-based awards granted to employees and directors based on the estimated fair values of the awards and recognizes
the compensation on a straight-line basis over the requisite service period. The fair value of options issued under the employee stock purchase plan is
calculated using the Black-Scholes option-pricing model. Restricted stock units are valued based on the closing price of the Company’s common stock on
the date of grant.
Comprehensive loss
For the years ended December 31, 2023, 2022 and 2021, other comprehensive income (loss) included net unrealized gains or losses on marketable
securities.
110
Income taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are
expected to affect taxable income. Management makes an assessment of the likelihood that the resulting deferred tax assets will be realized. A valuation
allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s historical
operating performance and the recorded cumulative net losses in prior fiscal periods, the net deferred tax assets have been fully offset by a valuation
allowance.
The Company recognizes uncertain income tax positions at the largest amount that is more likely than not to be sustained upon audit by the relevant
taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Changes in recognition or
measurement are reflected in the period in which judgment occurs. The Company’s policy is to recognize interest and penalties related to the underpayment
of income taxes as a component of interest expense.
Net loss per share attributable to common stockholders
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the
weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net
loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average
number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation,
redeemable convertible preferred stock, stock options, common stock subject to repurchase related to unvested restricted stock awards and early exercise of
stock options are considered to be potentially dilutive securities. Basic and diluted net loss attributable to common stockholders per share is presented in
conformity with the two-class method required for participating securities as the redeemable convertible preferred stock is considered a participating
security because it participates in dividends with common stock. The Company also considers the shares issued upon the early exercise of stock options
subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on
common stock. The holders of all series of redeemable convertible preferred stock and the holders of early exercised shares subject to repurchase do not
have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company
has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share for those periods.
Segment reporting
The Company has one operating and reportable segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the
Company’s operations on a consolidated basis for the purposes of allocating resources and evaluating financial performance. All of the Company’s long-
lived assets are located in the United States.
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the FASB, under its ASC or other standard setting bodies, and adopted by the
Company as of the specified effective date, unless otherwise discussed below. No new pronouncements were adopted by the Company for the year ended
December 31, 2023.
Recently announced accounting pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures (ASU 2023-
07). ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The
guidance is effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years, beginning after
December 15, 2024. Early application is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements.
Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories
identified and disclosed in the period of adoption. The Company is currently evaluating the impact of the standard on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures (ASU 2023-09). ASU
2023-09 relates to rate reconciliation and income taxes paid disclosures. The guidance is effective for public business entities for fiscal years beginning
after December 15, 2024. Early application is permitted. The guidance is to be applied on a prospective basis. The Company is currently evaluating the
impact of the standard on its consolidated financial statements.
111
3. Acquisition
On November 9, 2023 (the Closing Date), the Company completed the acquisition of EQRx (the EQRx Acquisition). Pursuant to the Agreement and
Plan of Merger, dated as of July 31, 2023 (the Merger Agreement), EQRx, LLC survived as a wholly owned subsidiary of the Company.
On the Closing Date, each share of EQRx common stock issued and outstanding immediately prior to the completion of the EQRx Acquisition was
converted into the right to receive 0.1112 shares of the Company’s common stock. Outstanding stock options, restricted stock units and restricted stock
awards of EQRx were also converted into the Company’s common stock, subject to the terms of the Merger Agreement. The Company issued 54.8 million
shares of the Company’s common stock and paid $4.0 million in taxes to satisfy statutory income tax withholding obligations in conjunction with the
EQRx Acquisition.
The EQRx Acquisition provided the Company with additional financing through the acquisition of EQRx’s cash, cash equivalents, and marketable
securities, which comprised the majority of the net assets acquired from EQRx. As the Company primarily acquired these monetary assets, the EQRx
Acquisition was accounted for as a capital-raising transaction with an asset acquisition component. EQRx does not meet the definition of a business under
Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations (ASC 805), due to the fair value of EQRx,
excluding cash and cash equivalents, as of the date of the EQRx Acquisition, being concentrated primarily in one asset class, marketable securities.
Under the asset acquisition method of accounting, the purchase consideration was allocated and recorded by the Company on a fair value basis to
the net assets acquired on the Closing Date. Any excess fair value of net assets of EQRx over the cost of the acquisition following determination of the
actual purchase consideration is allocated to EQRx’s qualifying assets under ASC 805. As there were no qualifying assets acquired the excess fair value of
net assets under ASC 805 was recorded to equity, as a capital-raising transaction. Because EQRx had wound down the majority of its research and
development activities and its operations by the time of the Closing Date, the net assets being acquired are primarily comprised of cash and cash
equivalents and marketable securities.
Revolution Medicines was considered the accounting acquirer of EQRx’s net assets under the provisions of ASC 805 due to Revolution Medicines
remaining in control of the combined entity after the EQRx Acquisition. The determination was primarily based on the evaluation of the following facts
and circumstances:
•
•
•
•
•
The pre-combination equity holders of Revolution Medicines held the relative majority of voting rights in the combined entity;
The pre-combination equity holders of Revolution Medicines had the right to appoint the majority of the directors on the combined entity’s
board of directors;
Senior management of Revolution Medicines comprise the senior management of the combined entity;
Operations of Revolution Medicines comprise the ongoing operations of the combined entity; and
The primary assets acquired in the EQRx Acquisition are cash and marketable securities.
The following table reflects the consideration transferred by the Company:
Fair value of shares of combined company to be owned by EQRx
stockholders (1)
Less: Fair value of EQRx equity awards converting to Revolution
Medicines common stock attributable to post-combination service
Taxes paid by Revolution Medicines on behalf of EQRx to satisfy
statutory income tax withholding obligations
Fair value of warrants
Fair value of contingent earn-out shares
Purchase price
Amount
(in thousands)
$
1,096,826
$
(11,150 )
4,026
6,907
490
1,097,099
$
(1) Represents the fair value of approximately 54.8 million shares of Revolution Medicines common stock issued, calculated using the per share
price of Revolution Medicines common stock of $20.02 as of November 9, 2023.
112
The following table summarizes the fair value of the assets acquired and liabilities assumed as of the Closing Date:
Cash and cash equivalents
Marketable securities
Prepaid expenses and other current assets
Restricted cash
Other noncurrent assets
Accounts payable
Accrued expenses and other current liabilities
Net assets acquired
Amount
(in thousands)
$
$
860,918
313,878
12,084
633
2,912
(6,893 )
(30,506 )
1,153,026
The excess fair value of net assets acquired over the purchase price was $55.9 million and was recorded to additional paid-in capital. The following
table calculates the excess of fair value of assets acquired over the purchase consideration under asset acquisition accounting:
Purchase price
Less: net assets acquired
Remaining excess fair value of net assets acquired over the purchase
price
$
$
Amount
(in thousands)
1,097,099
(1,153,026 )
(55,927 )
Transaction costs of $20.7 million incurred by the Company to complete the EQRx Acquisition were accounted for as a direct reduction to the
Company’s additional paid-in capital, as these costs were primarily incurred to issue Revolution Medicines common stock as part of the capital-raising
transaction.
In connection with the EQRx Acquisition, certain unvested outstanding stock options, restricted stock units and restricted stock awards of EQRx
were accelerated and converted into the Company’s common stock. As a result, the fair-value of the unvested portion of the accelerated EQRx equity
awards of $11.2 million was recognized as a post-combination expense and included in stock-based compensation expense for the year-ended December
31, 2023.
In connection with the EQRx Acquisition, as of the Closing Date, all public warrants of EQRx that were outstanding and unexercised immediately
prior to the Closing Date were converted into 11,039,957 publicly traded warrants (Public Warrants) and 8,693,333 private placement warrants of the
Company (Private Warrants and, together with the Public Warrants, the Warrants). Each Warrant entitles the holder to purchase 0.1112 shares of the
Company’s common stock, at an exercise price of $11.50 per such fractional share. The fair value of the Warrants on the Closing Date of $6.9 million was
included in the purchase price. The Warrants expire in December 2026. The Public Warrants and Private Warrants met liability classification requirements
because the Warrants contain provisions whereby adjustments to the settlement amount of the Warrants are based on a variable that is not an input to the
fair value of a “fix-for-fixed” option and the existence of the potential for net cash settlement for the Warrant holders in the event of a tender offer. In
addition, the Private Warrants are potentially subject to a different settlement amount depending upon the holder of the Private Warrants, which precludes
them from being considered indexed to the entity’s own stock. Therefore, the Warrants are classified as liabilities.
Prior to the EQRx Acquisition, holders of rights to EQRx earn-out shares held in escrow were entitled to receive additional shares of EQRx common
stock for no consideration upon the occurrence of certain stock price-based triggering events (the earn-out shares). The earn-out shares were converted in
the same manner as all other shares of EQRx common stock under the Merger Agreement and holders of rights to earn-out shares were entitled to receive
up to 5,560,000 shares of common stock of the Company, subject to the triggering events. In conjunction with the Merger Agreement, holders of rights to
approximately 82% of the holders of rights to the earn-out shares signed and delivered to the Company waiver and release agreements pursuant to which,
among other things, they have waived their respective rights to receive any such earn-out shares to which they may have been entitled upon the occurrence
of any vesting condition described below. As a result of these waiver and release agreements, the maximum amount of Company common stock to be
issued to holders of rights to earn-out shares upon the occurrence of certain triggering events was reduced to 973,976 shares. Holders of earn-out shares
may receive up to 681,784 shares of the Company common stock if the common stock price is greater than or equal to $112.41 for at least 20 out of 30
consecutive trading days prior to December 17, 2024, and up to 292,192 additional shares of Company common stock if the common stock price is greater
than or equal to $148.38 for at
113
least 20 out of 30 consecutive trading days prior to December 17, 2024. The rights to the earn-out shares expire on December 17, 2024. The fair value of
the earn-out shares on the Closing Date of $0.5 million was included in the purchase price.
In connection with the EQRx Acquisition, the Company incurred $14.3 million of severance and other employee-related post-combination expenses,
of which $8.2 million was attributed to employees working on research and development and $6.1 million was attributed to employees working on general
and administration. These expenses were included in the consolidated statements of operations and comprehensive loss.
4. Fair value measurements
The following table presents information about the Company’s financial assets that are measured at fair value and indicates the fair value hierarchy
of the valuation:
Assets:
Money market funds
Commercial paper
U.S. government and agency securities
Corporate bonds
Total
Liabilities:
Contingent earn-out liability
Warrant liabilities
Total
Assets:
Money market funds
Commercial paper
U.S. government and agency securities
Corporate bonds
Total
Total
Level 1
Level 2
Level 3
December 31, 2023
(in thousands)
288,757 $
692,352
786,406
85,218
1,852,733 $
288,757 $
—
—
—
— $
692,352
786,406
85,218
288,757 $ 1,563,976 $
—
—
—
—
—
1,000
6,512
7,512 $
—
3,643
3,643 $
—
2,869
2,869 $
1,000
—
1,000
Total
Level 1
Level 2
Level 3
December 31, 2022
(in thousands)
48,522 $
313,928
251,830
31,405
645,685 $
48,522 $
—
—
—
48,522 $
— $
313,928
251,830
31,405
597,163 $
—
—
—
—
—
$
$
$
$
$
Money market funds are measured at fair value on a recurring basis using quoted prices. U.S. government debt securities, government agency bonds,
commercial paper and corporate bonds are measured at fair value, which is derived from independent pricing sources based on quoted prices in active
markets for similar securities.
There were no transfers between Levels 1, 2 or 3 for any of the periods presented.
The fair value of the warrant liability was based on observable listed prices for such warrants. The fair value of the public warrants is categorized as
Level 1. The fair value of the private warrants is categorized as Level 2 as they are equivalent to the public warrants as they have substantially the same
terms; however they are not actively traded.
The contingent earn-out liability accounted for under ASC 815 is categorized as Level 3 fair value measurements within the fair value hierarchy
because the Company estimates projections utilizing unobservable inputs.
114
5. Available-for-sale securities
The following tables summarize the estimated value of the Company’s available-for-sale marketable securities and cash equivalents and the gross
unrealized gains and losses:
Marketable securities:
Commercial paper
U.S. government and agency securities
Corporate bonds
Total marketable securities
Cash equivalents:
Money market funds
Commercial paper
U.S. government and agency securities
Total cash equivalents
Total available-for-sale investments
Marketable securities:
Commercial paper
U.S. government and agency securities
Corporate bonds
Total marketable securities
Cash equivalents:
Money market funds
Commercial paper
Corporate bonds
Total cash equivalents
Total available-for-sale investments
Amortized
cost
December 31, 2023
Gross
unrealized
gain
Gross
unrealized
loss
(in thousands)
Estimated
fair value
$
$
460,979 $
610,188
85,030
1,156,197
288,757
231,380
175,855
695,992
1,852,189 $
108 $
769
189
1,066
—
33
3
36
1,102 $
$
(100 )
(355 )
(1 )
(456 )
460,987
610,602
85,218
1,156,807
—
(48 )
(54 )
(102 ) —
(558 )
288,757
231,365
175,804
695,926
$ 1,852,733
Amortized
cost
December 31, 2022
Gross
unrealized
gain
Gross
unrealized
loss
(in thousands)
$
$
216,765 $
236,916
31,599
485,280
48,522
97,526
16,137
162,185
647,465 $
— $
43
—
43
—
—
4
4
47 $
(328 )
(1,270 )
(194 )
(1,792 )
—
(35 )
—
(35 )
(1,827 )
Estimated
fair value
$
$
216,437
235,689
31,405
483,531
48,522
97,491
16,141
162,154
645,685
The amortized cost and estimated fair value of the Company’s available-for-sale marketable securities and cash equivalents by contractual maturity
are summarized below as of December 31, 2023:
Mature in one year or less
Mature after one year through two years
Total marketable securities
Amortized
cost
$
$
1,684,099 $
168,090
1,852,189 $
December 31, 2023
Gross
unrealized
gain
Gross
unrealized
loss
Estimated
fair value
(in thousands)
387 $
715
1,102 $
(556 )
(2 )
(558 )
$ 1,683,930
168,803
$ 1,852,733
115
6. Balance sheet components
Property and equipment, net
Property and equipment, net consist of the following:
Laboratory equipment
Leasehold improvements
Computer equipment and software
Furniture and fixtures
Construction in progress
Less: accumulated depreciation and amortization
Property and equipment, net
December 31,
2023
2022
(in thousands)
21,505 $
11,952
5,806
783
513
40,559
(17,694 )
22,865 $
17,163
11,404
3,965
616
—
33,148
(14,489 )
18,659
$
$
Depreciation and amortization expense for property and equipment amounted to $5.0 million, $4.0 million and $3.1 million for the years ended
December 31, 2023, 2022 and 2021, respectively.
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following:
Accrued compensation
Accrued research and development
Accrued professional services
Other
Total accrued expenses and other current liabilities
7. Intangible assets and goodwill
Intangible assets, net
Intangible assets, net consist of the following as of December 31, 2023:
December 31,
2023
2022
(in thousands)
23,613 $
45,003
2,182
3,896
74,694 $
13,281
15,161
499
505
29,446
$
$
In-process research and development — RAS
Programs
Developed technology — tri-complex platform
Total
Gross value
Accumulated
amortization
Net book
value
(in thousands)
Weighted-
average
remaining
useful life
(in years)
$
$
55,800 $
7,480
63,280 $
— $
(5,541 )
(5,541 ) $
55,800
1,939
57,739
n/a
1.9
Amortization expense was $1.1 million for each of the years ended December 31, 2023, 2022 and 2021, respectively.
116
As of December 31, 2023, future amortization expense is as follows:
2024
2025
Total
Amount
(in thousands)
$
$
1,069
870
1,939
Intangible assets, net consist of the following as of December 31, 2022:
In-process research and development — RAS
Programs
Developed technology — tri-complex platform
Total
Goodwill
Goodwill consists of the following:
Gross value
Accumulated
amortization
(in thousands)
Net book
value
Weighted-
average
remaining
useful life
(in years)
$
$
55,800 $
7,480
63,280 $
— $
(4,473 )
(4,473 ) $
55,800
3,007
58,807
n/a
2.9
Balance at December 31, 2022
Adjustment
Balance at December 31, 2023
Amount
(in thousands)
$
$
14,608
—
14,608
No impairment has been recognized as of December 31, 2023. Goodwill is not deductible for income tax purposes.
8. Commitments and contingencies
Leases
In January 2015, as amended in September 2016, the Company entered into an operating lease for approximately 42,000 square feet of office and
laboratory space located at 700 Saginaw Drive, Redwood City, California (the 700 Building), with a term through April 2023. In April 2020, the Company
amended the lease to lease an additional 19,000 square feet of office, laboratory and research and development space located at 300 Saginaw Drive,
Redwood City, California (the 300 Building), and to extend the lease term through December 2030. In November 2021, the Company amended the lease to
lease an additional 41,000 square feet of office, laboratory and research and development space located at 800 Saginaw Drive, Redwood City, California
(the 800 Building), and to extend the lease term through November 2033. In March 2023, the Company amended the lease to lease an additional
approximately 40,000 square feet of office, laboratory and research and development space located at 900 Saginaw Drive, Redwood City, California (the
900 Building), and to extend the lease term through December 31, 2035. The Company has the option to extend the lease for an additional ten years after
December 31, 2035. The Company obtained possession of the 900 Building in October 2023.
The Company maintains letters of credit for the benefit of the landlord which are classified as restricted cash in the consolidated balance sheets.
Restricted cash related to letters of credit due to the landlord was $2.4 million and $1.5 million as of December 31, 2023 and December 31, 2022,
respectively.
Through December 31, 2023, the landlord had provided the Company with $9.6 million in tenant improvement allowances collectively for the 700
Building, 300 Building and 900 Building, which were recognized as lease incentives. The lease incentives are being amortized as an offset to rent expense
over the lease term in the consolidated statements of operations and comprehensive loss.
117
Upon the execution of the lease in April 2020, which was deemed to be a lease modification, the Company re-evaluated the assumptions used during
the adoption of ASC 842 for the lease. The Company determined the amendment consists of two separate contracts under ASC 842. One contract is related
to a new right-of-use asset for the 300 Building, which is being accounted for as an operating lease, and the other is related to the modification of the
original lease term for the 700 Building. As a result, the Company recorded a right-of-use asset of $6.4 million and a lease liability of $9.0 million for the
300 Building and an increase of $14.8 million to the right-of-use asset and lease liability for the 700 Building upon execution of the lease amendment. The
Company is recognizing rent expense for both buildings on a straight-line basis through the remaining extended term of the lease.
Upon the execution of the lease amendment in November 2021, which was deemed to be a lease modification, the Company re-evaluated the
assumptions used during the lease amendment in April 2020. The Company determined the amendment consists of two separate contracts under ASC 842.
One contract is related to a new right-of-use asset for the 800 Building, which is being accounted for as an operating lease, and the other is related to the
modification of the lease term, as amended in April 2020, for the 700 Building and 300 Building. As a result, the Company recorded a right-of-use asset
and a lease liability of $26.8 million for the 800 Building and an aggregate increase of $8.6 million to the right-of-use assets and lease liabilities for the 700
Building and 300 Building upon execution of the lease amendment. The Company is recognizing rent expense for the buildings on a straight-line basis
through the remaining extended term of the lease.
Upon the execution of the lease amendment in March 2023, which was deemed to be a lease modification, the Company re-evaluated the
assumptions used during the lease amendment in November 2021. The Company determined the amendment consists of two separate contracts under ASC
842. One contract is related to a new right-of-use asset for the 900 Building, which is being accounted for as an operating lease, and the other is related to
the modification of the lease term, as amended in November 2021, for the 700 Building, 300 Building and 800 Building. As a result, the Company recorded
a right-of-use asset and a lease liability of $25.0 million for the 900 Building and an aggregate increase of $0.3 million to the right-of-use assets and lease
liabilities for the 700 Building, 300 Building and 800 Building upon execution of the lease amendment. The Company is recognizing rent expense for the
buildings on a straight-line basis through the remaining extended term of the lease.
The balance sheet classification of the Company’s operating lease liabilities was as follows:
Operating lease liabilities:
Operating lease liability – current
Operating lease liability – noncurrent
Total operating lease liabilities
December 31,
2023
(in thousands)
$
$
7,369
80,575
87,944
The components of lease costs for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):
Operating lease cost
Less: Sublease income
Total operating lease cost, net
(1)
2023
December 31,
2022
2021
$
$
8,485 $
(302 )
8,183 $
8,854 $
(2,476 )
6,378 $
5,550
(2,135 )
3,415
(1) Net lease cost does not include short-term lease and variable lease costs, which were immaterial.
118
As of December 31, 2023, the maturities of the Company’s operating lease liabilities were as follows (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total undiscounted lease payments
Less: Imputed interest
Total operating lease liabilities
$
$
$
7,767
10,476
10,843
11,222
11,615
93,486
145,409
(57,465 )
87,944
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the
present value of lease payments, the Company uses its incremental borrowing rate. The weighted-average discount rate used to determine the operating
lease liability was 8.4%. As of December 31, 2023 and 2022, the weighted-average remaining lease term is 12.0 years and 10.9 years, respectively.
In conjunction with the EQRx Acquisition, the Company assumed an operating lease in Cambridge, Massachusetts with a lease term through July
2024. As part of the operating lease, the Company assumed outstanding lease payments of $2.5 million, which are included in accrued expenses and other
current liabilities as of December 31, 2023.
Legal matters
From time to time, the Company may be involved in litigation related to claims that arise in the ordinary course of its business activities. The
Company accrues for these matters when it is probable that losses will be incurred and these losses can be reasonably estimated. As of December 31, 2023,
2022 and 2021, the Company does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s
financial position, results of operations or cash flows.
Indemnification
The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company
indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any
trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these
indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the
Company could be required to make under these arrangements is not determinable. The Company has not incurred costs to defend lawsuits or settle claims
related to these indemnification agreements. As a result, the Company believes the fair value of these agreements is minimal.
Other
The Company enters into agreements in the ordinary course of business with contract research organizations for clinical trials, contract
manufacturing organizations to provide clinical trial materials and with vendors for preclinical studies and other services and products for operating
purposes which are generally cancelable at any time by us upon 30 to 90 days prior written notice.
9. Sanofi collaboration agreement
In June 2018, the Company entered into a collaborative research, development and commercialization agreement (the Sanofi Agreement) with
Aventis, Inc. (an affiliate of Sanofi) to research and develop SHP2 inhibitors, including RMC-4630, for any indications. The Sanofi Agreement was
assigned to Genzyme Corporation, a Sanofi affiliate, in December 2018. For the purposes of this discussion, the Company refers to Genzyme Corporation
as Sanofi. The Sanofi Agreement was terminated in June 2023.
119
Pursuant to the Sanofi Agreement, the Company granted Sanofi a worldwide, exclusive, sublicensable (subject to the Company’s consent in certain
circumstances) license under certain of the Company’s patents and know-how to research, develop, manufacture, use, sell, offer for sale, import and
otherwise commercialize SHP2 inhibitors, including RMC-4630, for any and all uses, subject to the Company’s exercise of rights and performance of
obligations under the Sanofi Agreement.
Under the Sanofi Agreement, the Company had primary responsibility for early clinical development of RMC-4630 pursuant to an approved
development plan. Sanofi was responsible for reimbursing the Company for all internal and external costs and expenses to perform its activities under
approved development plans, except for costs and expenses related to the RMC-4630-03 study, for which Sanofi reimbursed the Company 50% of the costs
and expenses.
Pursuant to the Sanofi Agreement, the Company received an upfront payment of $50 million from Sanofi in July 2018. The Sanofi Agreement
included obligations for Sanofi to make certain milestone payments and royalty payments, all of which expired on termination of the Sanofi Agreement.
Upon termination of the Sanofi Agreement, the licenses granted to Sanofi thereunder became fully paid-up, royalty-free, perpetual and irrevocable
and all rights and obligations of Sanofi under the Sanofi Agreement reverted to the Company.
The Company identified the following promises in the agreement (1) the license related to SHP2 inhibitors, (2) the performance of research and
development services for Phase 1 clinical studies and Phase 2 clinical trials that are non-registrational clinical trials and (3) the performance of
manufacturing services for the non-registrational clinical trials. The Company determined that the license is not distinct from the services within the context
of the agreement because the research, development and manufacturing significantly increase the utility of the intellectual property. The intellectual
property (IP) related to SHP2 inhibitors, which is proprietary to the Company, is the foundation for the research and development activities. The
manufacturing services are a necessary and integral part of the research and development services as they could only be conducted utilizing the outcomes
of these services. Given the research and development services under the Sanofi Agreement are expected to involve significant further development of the
initial IP, the Company has concluded that the research, development and manufacturing services are not distinct from the license, and thus the license,
research and development services and manufacturing services are combined into a single performance obligation.
For revenue recognition purposes, the Company determined that the duration of the contract begins on the effective date of the Sanofi Agreement in
July 2018 and ends on the termination date in June 2023.
During the years ended December 31, 2023, 2022 and 2021, the Company recognized $11.6 million, $35.4 million and $29.4 million of
collaboration revenue associated with this agreement, respectively.
As of December 31, 2023 and 2022, zero and $4.5 million of deferred revenue was classified as current, respectively.
10. Common stock
As of December 31, 2023 and 2022, the Company’s certificate of incorporation authorized the Company to issue 300,000,000 shares of common
stock, at a par value of $0.0001 per share. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive
dividends whenever funds are legally available and when declared by the Board of Directors. As of December 31, 2023, no dividends have been declared to
date.
The Company has reserved shares of common stock for future issuance as follows:
Outstanding options to purchase common stock
Unvested restricted stock units of common stock
Available for future issuance under the 2020 Incentive Award Plan
Available for issuance under the 2020 Employee Stock Purchase Plan
Total
December 31,
December 31,
2023
2022
8,164,375
11,083,349
1,175,032
2,161,267
6,726,307
6,241,188
2,394,407
1,700,887
21,880,211 17,766,601
120
11. Stock-based compensation
2020 Incentive Award Plan
In February 2020, the Company adopted the 2020 Equity Incentive Plan (the 2020 Plan). The 2020 Plan became effective on February 11, 2020. The
2020 Plan provides for a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, restricted
stock unit awards, performance bonus awards, performance stock unit awards, dividend equivalents, or other stock or cash based awards. Under the 2020
Plan, the Company generally grants stock-based awards with service-based vesting conditions only. Options and restricted stock unit awards granted
typically vest over a four-year period, but may be granted with different vesting terms.
Following the effectiveness of the 2020 Plan, the Company will not make any further grants under the 2014 Equity Incentive Plan (the 2014 Plan).
However, the 2014 Plan will continue to govern the terms and conditions of the outstanding awards granted under it. Shares of common stock subject to
awards granted under the 2014 Plan that are forfeited or lapse unexercised and which following the effective date of the 2020 Plan were not issued under
the 2014 Plan are available for issuance under the 2020 Plan.
2020 Employee Stock Purchase Plan
In February 2020, the Company adopted the 2020 Employee Stock Purchase Plan (the ESPP). Under the ESPP, employees have the ability to
purchase shares of the Company’s common stock through payroll deductions at a discount during a series of offering periods of 24 months, each comprised
of four six-month purchase periods. The purchase price will be the lower of 85% of the closing trading price per share of the Company’s common stock on
the first day of an offering period in which an employee is enrolled or 85% of the closing trading price per share on the purchase date, which will occur on
the last trading day of each purchase period.
As of December 31, 2023, there have been 210,679 shares of common stock purchased under the ESPP. As of December 31, 2023, a total of
2,394,407 shares of common stock were available for future issuance under the ESPP. As of December 31, 2023, there was $3.3 million of unrecognized
compensation cost related to the ESPP.
Stock options
The following summarizes option activity under both the 2020 Plan and the 2014 Plan:
Balance, December 31, 2022
Options granted
Options exercised
Options cancelled and forfeited
Balance, December 31, 2023
Options vested and exercisable as of December 31, 2023
Number of
Shares
underlying
options
Weighted-
average
exercise price
8,164,375 $
3,660,200
(524,094 )
(217,132 )
11,083,349 $
6,017,790 $
16.09
26.21
6.33
28.91
19.64
14.92
Weighted-
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
(in thousands)
7.53 $
85,181
7.50 $
115,009
6.36 $
92,543
The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise
price of the options and the estimated fair value of the Company’s common stock by the Board of Directors. The intrinsic value of the options exercised for
the years December 31, 2023, 2022 and 2021 was $10.7 million, $3.8 million and $13.1 million, respectively.
During the years ended December 31, 2023, 2022 and 2021, the weighted-average grant-date fair value of options granted was $17.82, $12.33 and
$25.13 per share, respectively. As of December 31, 2023, there was $79.5 million of unrecognized stock-based compensation expense related to unvested
stock options that is expected to be recognized over a weighted-average period of 2.75 years.
121
The fair value of employee and director stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the
following assumptions:
Expected term (years)
Expected volatility
Risk-free interest rate
Dividend yield
2023
6
Year Ended December 31,
2022
6
73%-75%
3.5%-4.7%
70-73%
1.5%-4.2%
0%
0%
2021
6
70-75%
0.5%-1.3%
0%
The Black-Scholes model assumptions that determine the fair value of stock-based awards include:
Expected term—The expected term is calculated using the simplified method, which is available where there is insufficient historical data about
exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for
each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration
date is used as the expected term under this method.
Expected volatility—Given the Company does not have sufficient trading history for its common stock, the expected volatility was estimated based
on the average volatility of the Company and comparable publicly traded biotechnology companies over a period equal to the expected term of the stock
option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty.
Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods
corresponding with the expected term of option.
Expected dividend—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock.
Therefore, the Company used an expected dividend yield of zero.
Restricted stock units
Restricted stock units (RSUs) have been granted to employees and directors. The fair value of an RSU award is based on the Company’s stock price
on the date of grant. The shares underlying the RSU awards are not issued until the RSUs vest. Upon vesting, each RSU converts into one share of the
Company’s common stock. The Company has granted RSUs pursuant to the 2020 plan.
Activity under the 2020 Plan with respect to the Company’s RSUs during the year ended December 31, 2023 was as follows:
Balance, December 31, 2022
RSUs granted
RSUs vested
RSUs forfeited
Balance, December 31, 2023
Expected to vest as of December 31, 2023
Number of
Shares
Weighted-
average
grant date
fair value
per share
Weighted-
average
remaining
contractual
term
(in years)
Aggregate
intrinsic value
(in thousands)
1,175,032 $
1,639,472
(576,974 )
(76,263 )
2,161,267 $
2,161,267 $
23.25
26.30
24.84
24.15
25.10
25.10
1.62 $
27,989
1.56 $
1.56 $
61,985
61,985
The number of RSUs vested includes shares of common stock that the Company withheld to satisfy the minimum statutory tax withholding
requirements. As of December 31, 2023, there was $51.0 million of total unrecognized compensation cost related to RSUs that is expected to be recognized
over a weighted average period of 2.95 years.
122
The total grant date fair value of RSUs vested for the years ended December 31, 2023, 2022 and 2021 was $14.3 million, $7.9 million and $3.1
million, respectively.
Stock-based compensation expense
Total stock-based compensation expense related to stock options, RSUs and the ESPP by function was as follows:
Research and development
General and administrative
Total
2023
Year Ended December 31,
2022
(in thousands)
2021
$
$
34,126 $
27,646
61,772 $
18,113 $
13,083
31,196 $
11,847
8,877
20,724
In connection with the EQRx Acquisition, certain unvested outstanding stock options, restricted stock units and restricted stock awards of EQRx
were accelerated and converted into the Company’s common stock. The fair-value of the unvested portion of the accelerated EQRx equity awards of $11.2
million (of which $3.7 million was attributed to employees working on research and development projects and $7.5 million working on general and
administration) was recognized as a post-combination expense and included in stock-based compensation expense for the year ended December 31, 2023.
12. Income taxes
The Company’s income (loss) before provision for income taxes for the years ended December 31, 2023 and 2022 consist of the following:
Domestic
International
Income (loss) before provision for income taxes
2023
December 31,
(in thousands)
2022
$
$
(440,683 ) $
792
(439,891 ) $
(249,125 )
—
(249,125 )
The components of the provision for income taxes for the years ended December 31, 2023 and 2022 consist of the following:
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Benefit for income taxes
2023
December 31,
(in thousands)
2022
$
$
— $
112
212
324
—
(3,865 )
17
(3,848 )
(3,524 ) $
—
—
—
—
—
(420 )
—
(420 )
(420 )
123
The Company recorded an income tax benefit of 3.5 million and $0.4 million for the years ended December 31, 2023 and 2022, respectively, which
reflects a change in state tax rate applied to the indefinite lived intangibles recorded as part of our acquisition of Warp Drive Bio in 2018. Deferred tax
assets and liabilities are recognized for the future tax consequences attributable to the differences between the carrying amounts of existing assets and
liabilities in the financial statements and their respective tax bases using tax rates expected to be in effect during the years in which the basis differences
reverse.
The benefit from income taxes differs from the amount expected by applying the federal statutory rate to the loss before taxes as follows:
Federal statutory income tax rate
State income tax rate, net of federal benefit
Foreign rate differential
Research tax credits
Change in valuation allowance
Non-deductible permanent expenses
Stock based compensation
Other
Benefit from income taxes
Year Ended December 31,
2022
2023
21.0 %
-2.3 %
0.0 %
2.7 %
-19.8 %
0.1 %
-0.8 %
-0.1 %
0.8 %
21.0 %
9.4 %
0.0 %
3.2 %
-32.4 %
-0.1 %
-0.9 %
0.0 %
0.2 %
Deferred income tax reflects the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The categories that give rise to significant components of the deferred tax assets are as follows (in
thousands):
Deferred tax assets:
Net operating loss carryforwards
Accruals and reserves
Research and development credits
Lease liability
Stock-based compensation
Capitalized research expenses
Other
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Fixed assets and finite-lived intangible assets
Indefinite-lived intangible assets
Right-of-use asset
Gross deferred tax liabilities
Net deferred tax liability
December 31,
2023
2022
(in thousands)
147,576 $
5,747
34,755
19,628
9,872
185,909
161
403,648
(376,762 )
26,886
(9,683 )
(3,099 )
(17,219 )
(30,001 )
(3,115 ) $
132,080
5,494
22,558
18,998
7,063
64,149
42
250,384
(224,125 )
26,259
(9,961 )
(7,025 )
(16,298 )
(33,284 )
(7,025 )
$
$
The realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Due to the lack of
earnings history, the net deferred tax assets have been offset by a valuation allowance excluding certain indefinite lived intangibles. The valuation
allowance increased by $152.6 million and $80.7 million during the years ended December 31, 2023 and 2022, respectively. The Company had federal and
state net operating loss carryforwards of $520.8 million and $793.0 million, respectively, as of December 31, 2023. The federal net operating loss
carryforwards, if not utilized, will expire beginning in 2035, with the exception of $427.1 million in federal net operating loss carryforwards, which can be
carried forward indefinitely. State net operating loss carryforwards, if not utilized, will expire beginning in 2035. Under the Tax Cuts and Jobs Act (TCJA),
federal net operating losses arising after December 31, 2017 do not expire and cannot be carried back. However, the TCJA limits the amount of federal net
operating losses that can be used annually to 80% of taxable income for periods beginning after December 31, 2017. Existing federal net operating losses
arising in years ending on or before December 31, 2017 are not affected by these provisions.
124
The Company also had federal and state research and development credit carryforwards of $32.1 million and $17.1 million, respectively, as of
December 31, 2023. The federal research credits will expire beginning in 2034 if not utilized and the state research credits will expire beginning in 2031,
with the exception of $16.3 million in California research credits, which can be carried forward indefinitely. Federal and state tax laws impose significant
restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue
Code Section 382 (Section 382). The Company performed a study in which it determined that it had experienced changes in ownership in 2014, 2020 and
2023 as defined by Section 382. No federal or state net operating losses are expected to expire unutilized as a result of the limitation, with the exception of
$5.5 million in California net operating losses. The Company's deferred tax assets have been reduced by the amount of net operating loss carryforwards
expected to expire due to the limitation. In addition, in the future the Company may experience ownership changes, which may limit the utilization of net
operating loss carryforwards or other tax attributes.
The TCJA amended Internal Revenue Code Section 174 requiring capitalization of specified research and experimental expenditures paid or
incurred in tax years beginning after December 31, 2021 and amortizing over a period of 5 or 15 years. This resulted in a deferred tax asset for capitalized
research expenses in 2023 and 2022.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
Beginning balance
Changes related to tax positions taken in the prior year
Changes related to tax positions taken in the current year
Ending balance
December 31,
2023
2022
(in thousands)
7,602 $
155,178
28,627
191,407 $
5,143
(7 )
2,466
7,602
$
$
The Company has unrecognized tax benefits of $184.2 million and $7.1 million as of December 31, 2023 and 2022, which would affect the effective
tax rate if recognized; however, recognition would be in the form of a deferred tax attribute which would likely be offset by a valuation allowance. The
Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months. The Company has recognized no interest or
penalties related to uncertain tax positions for the periods presented.
Income tax returns are filed in the United States. The years 2010 through 2023 remain open to examination by the domestic taxing jurisdictions to
which the Company is subject. Net operating losses generated on a tax return basis by the Company for 2010 through 2023 remain open to examination by
the domestic taxing jurisdictions.
13. Net loss per share attributable to common stockholders
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:
Numerator:
Net loss attributable to common stockholders
Denominator:
Weighted-average shares outstanding
Less: Weighted-average unvested restricted shares and
shares subject to repurchase
Weighted-average shares used to compute net loss per share
attributable to common stockholders, basic and diluted
Net loss per share attributable to common stockholders, basic
and diluted
Years Ended December 31,
2023
2021
2022
(in thousands, except share and per share data)
$
(436,367 ) $
(248,705 ) $
(187,091 )
113,149,869
80,636,570
72,866,022
—
(10,045 )
(59,943 )
113,149,869
80,626,525
72,806,079
$
(3.86 ) $
(3.08 ) $
(2.57 )
125
The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented
due to their anti-dilutive effect:
Options to purchase common stock
Options early exercised subject to future vesting
Unvested restricted stock units of common stock
Expected shares to be purchased under ESPP
Warrants outstanding
Earn-out shares
Total
126
2023
11,083,349
—
2,161,267
230,651
2,194,342
973,976
16,643,585
As of December 31,
2022
8,164,375
6,918
1,175,032
378,429
—
—
9,724,754
2021
6,050,938
30,378
423,621
176,131
—
—
6,681,068
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, our principal executive officer
and principal financial officer, respectively, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) as of December 31, 2023. Based on the evaluation, our President and Chief Executive Officer and our Chief
Financial Officer have concluded that, as of December 31, 2023, our disclosure controls and procedures were effective.
Management’s annual report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange
Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting
principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of our internal control over financial reporting based on the framework set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on our evaluation,
management has concluded that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2023.
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which appears herein.
Changes in internal control over financial reporting
There were no changes in our internal controls over financial reporting during the three months ended December 31, 2023 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent limitation on the effectiveness over financial reporting
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise
of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely.
Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide
reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to
continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be
sufficient to provide us with effective internal control over financial reporting.
Item 9B. Other Information.
Rule 10b5-1 Plans
On December 1, 2023, Mark A. Goldsmith, M.D., Ph.D., the Company’s President and Chief Executive Officer and Chair of the Board of Directors,
adopted a Rule 10b5-1 trading plan. Dr. Goldsmith’s Rule 10b5-1 trading plan is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)
and provides for (i) the potential exercise and sale of up to 150,000 shares of the Company’s common stock subject to a stock option held by Dr.
Goldsmith, (ii) the potential sale of up to 15,000 shares of the Company’s common stock by a trust in which Dr. Goldsmith is a trustee and (iii) the potential
sale of up to 15,000 shares of the Company’s common stock by a trust in which Dr. Goldsmith is a trustee, in each case until March 31, 2025.
127
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
128
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information required by this item will be contained in our definitive proxy statement to be filed with the SEC on Schedule 14A within 120 days after
December 31, 2023, and is incorporated herein by reference.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our officers, directors and employees, which is available on our website at
ir.revmed.com/. The Code of Business Conduct and Ethics contains general guidelines for conducting the business of our company consistent with the
highest standards of business ethics and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002
and Item 406 of Regulation S-K. In addition, we intend to promptly disclose (1) the nature of any amendment to our Code of Business Conduct and Ethics
that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions
and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the
name of such person who is granted the waiver and the date of the waiver on our website in the future.
Item 11. Executive Compensation.
Information required by this item will be contained in our definitive proxy statement to be filed with the SEC on Schedule 14A to be filed within
120 days after December 31, 2023, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information required by this item will be contained in our definitive proxy statement to be filed with the SEC on Schedule 14A to be filed within
120 days after December 31, 2023, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information required by this item will be contained in our definitive proxy statement to be filed with the SEC on Schedule 14A to be filed within
120 days after December 31, 2023, and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
Information required by this item will be contained in our definitive proxy statement to be filed with the SEC on Schedule 14A to be filed within
120 days after December 31, 2023, and is incorporated herein by reference.
129
Item 15. Exhibits, Financial Statement Schedules.
(a)
1.
The following documents are filed as part of this Annual Report on Form 10-K:
Financial Statements:
PART IV
The following financial statements and schedules of the Registrant are contained in Part II, Item 8, “Financial Statements and Supplementary Data”
of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2.
Financial Statement Schedules
Page
100
102
103
104
105
106
No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or
notes thereto.
(b)
Exhibits
The exhibits listed in the following “Exhibit Index” are filed, furnished or incorporated by reference as part of this Annual Report.
130
Exhibit
number
Exhibit description
Form
Date
Number
Filed
herewith
Incorporated by reference
Exhibit Index
2.1
3.1
3.2
4.1
4.2
4.3
4.4(a)
4.4(b)
4.5
10.1A†
10.1B†
10.2
10.3A
10.3B
10.3C
Agreement and Plan of Merger, dated July 31, 2023, by and among Revolution Medicines,
Inc., EQRx, Inc., Equinox Merger Sub I, Inc. and Equinox Merger Sub II LLC.
Amended and Restated Certificate of Incorporation.
Amended and Restated Bylaws.
Reference is made to Exhibits 3.1 through 3.2.
Form of Common Stock Certificate.
Description of Securities.
8-K
8/1/2023
8-K
2/18/2020
8-K
3/8/2021
2.1
3.1
3.1
S-1
1/17/2020
4.2
Warrant Agreement, dated April 6, 2021, by and between Continental Stock Transfer &
Trust Company and EQRx, Inc.
Appointment, Assignment and Assumption Agreement, dated November 9, 2023, by and
among EQRx, Inc., Revolution Medicines, Inc., Continental Stock Transfer & Trust
Company and Equiniti Trust Company, LLC.
8-A 11/15/2023
4.2(b)
Agreement and Plan of Merger, dated August 5, 2021, by and among EQRx, Inc. (f/k/a
CM Life Sciences III Inc.), Clover III Merger Sub Inc. and EQRx International, Inc. (f/k/a
EQRx, Inc.).
Collaborative Research, Development and Commercialization Agreement, dated as of June
8, 2018, by and between Revolution Medicines, Inc. and Aventis, Inc., as amended.
S-1
1/17/2020
10.1
Letter Agreement and Amendment, dated as of August 5, 2021 by and between Revolution
Medicines, Inc. and Genzyme Corporation.
10-Q 8/11/2021
10.2
Amended and Restated Investors’ Rights Agreement, dated as of June 5, 2019, by and
among Revolution Medicines, Inc. and the investors listed therein.
S-1
1/17/2020
10.2
Lease between HCP LS Redwood City, LLC and Revolution Medicines, Inc., dated as of
January 15, 2015.
S-1
1/17/2020
10.3A
First Amendment to Lease by and between HCP LS Redwood City, LLC and Revolution
Medicines, Inc., dated as of September 16, 2016.
S-1
1/17/2020 10.3B
Sublease between OncoMed Pharmaceuticals, Inc. and Revolution Medicines, Inc., dated
as of January 16, 2019.
S-1
1/17/2020 10.3C
10.3D
Second Amendment to Lease by and between HCP LS Redwood City, LLC and
Revolution Medicines, Inc., dated as of April 17, 2020.
10-Q
5/14/2020
10.4
X
X
X
10.3E
10.3F
10.3G
Third Amendment to Lease by and between HCP LS Redwood City, LLC and Revolution
Medicines, Inc., dated as of November 1, 2021.
10-Q 11/10/2021
10.1
Fourth Amendment to Lease and between HCP LS Redwood City, LLC and Revolution
Medicines, Inc., dated as of March 24, 2023
10-Q
5/8/2023
10.2
Fifth Amendment to Lease and between HCP LS Redwood City, LLC and Revolution
Medicines, Inc., dated as of August 3, 2023
10.4(a)#
2014 Equity Incentive Plan, as amended.
131
10-Q
11/6/2023
10.3
S-1
1/17/2020
10.6(a)
Exhibit
number
10.4(b)#
Exhibit description
Form of Amended and Restated Early Exercise Stock Option Grant Notice and Amended
and Restated Stock Option Agreement under 2014 Equity Incentive Plan, as amended.
10.5(a)#
2020 Incentive Award Plan.
Incorporated by reference
Form
Date
Number
Filed
herewith
S-1
1/17/2020 10.6(b)
S-1/A
2/3/2020
10.7(a)
10.5(b)#
Form of Stock Option Grant Notice and Stock Option Agreement under the 2020
Incentive Award Plan.
S-1/A
2/3/2020
10.7(b)
10.5(c)#
Form of Restricted Stock Award Agreement under the 2020 Incentive Award Plan.
S-1/A
2/3/2020
10.7(c)
10.5(d)#
Form of Restricted Stock Unit Award Grant Notice under the 2020 Incentive Award Plan.
S-1/A
2/3/2020
10.7(d)
10.6#
2020 Employee Stock Purchase Plan.
S-1/A
2/3/2020
10.8
Employment Agreement by and between Revolution Medicines, Inc. and Mark A.
Goldsmith, M.D., Ph.D.
S-1
1/17/2020
10.9
First Amendment to Employment Agreement dated June 10, 2022 by and between
Revolution Medicines, Inc. and Mark Goldsmith, M.D., Ph.D.
8-K 06/10/2022
10.1
Employment Agreement by and between Revolution Medicines, Inc. and Steve Kelsey,
M.D., FRCP, FRCPath.
S-1
1/17/2020
10.10
10.7A#
10.7B#
10.8#
10.9#
Employment Agreement by and between Revolution Medicines, Inc. and Margaret Horn,
J.D.
10.10#
Non-Employee Director Compensation Program.
S-1
1/17/2020
10.11
10-Q 05/08/2023
10.1
10.11#
Form of Indemnification Agreement for directors and officers.
S-1/A
2/3/2020
10.13
10-Q 05/09/2022
10.2
10-Q 05/09/2022
10.3
10.12#
10.13#
21.1
23.1
24.1
31.1
31.2
32.1*
32.2*
Employment Agreement by and between Revolution Medicines, Inc.
and Jack Anders.
Employment Agreement by and between Revolution Medicines, Inc.
and Xiaolin Wang Sc.D.
Subsidiaries of Registrant.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (included on signature page to this Form 10-K).
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97
Policy for Recovery of Erroneously Awarded Compensation
132
X
X
X
X
X
X
X
X
Exhibit
number
101.INS Inline XBRL Instance Document.
Exhibit description
Form
Date
Number
Incorporated by reference
101.SCH Inline XBRL Taxonomy Extension Schema with Embedded Linkbases Document.
104
The cover page from Revolution Medicines, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2023, formatted in Inline XBRL and contained in Exhibit 101.
Filed
herewith
X
X
X
† Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) is the type of information that Revolution Medicines, Inc. treats as private or
confidential.
# Indicates management contract or compensatory plan.
* The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be
incorporated by reference into any filing of Revolution Medicines, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the
date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
Item 16. Form 10-K Summary.
None.
133
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Revolution Medicines, Inc.
Date: February 26, 2024
By:
/s/ Mark A. Goldsmith
Mark A. Goldsmith, M.D., Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Mark A.
Goldsmith, M.D., Ph.D., Jack Anders and Jeff Cislini and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each
with full power of substitution, for him in any and all capacities, to sign any and all amendments to this annual report on Form 10-K, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Name
Title
/s/ Mark A. Goldsmith
Mark A. Goldsmith, M.D., Ph.D.
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Jack Anders
Jack Anders
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Elizabeth McKee Anderson
Elizabeth McKee Anderson
/s/ Flavia Borellini
Flavia Borellini, Ph.D.
/s/ Alexis Borisy
Alexis Borisy
/s/ Sandra Horning
Sandra J. Horning, M.D.
/s/ Lorence Kim
Lorence Kim, M.D.
/s/ Sushil Patel
Sushil Patel, Ph.D.
/s/ Thilo Schroeder
Thilo Schroeder, Ph.D.
/s/ Barbara Weber
Barbara Weber, M.D.
Director
Director
Director
Director
Director
Director
Director
Director
134
Date
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.3
Revolution Medicines, Inc. (“we,” “us,” “our” and the “Company”) has two classes of securities registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”): our common stock and public warrants. The following description of our common stock and warrants is a
summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our amended and restated certificate of
incorporation; our amended and restated bylaws; our amended and restated investors’ rights agreement to which we and certain of our stockholders are
parties; the warrant-related documents described herein and the earn-out related documents described herein, each of which are incorporated by reference
as exhibits to the Annual Report on Form 10-K, of which this exhibit is a part, and by applicable law. We encourage you to read our amended and restated
certificate of incorporation; our amended and restated bylaws; our amended and restated investors’ rights agreement; the warrant-related documents
described herein; the earn-out related documents described herein and the applicable provisions of Delaware law for more information.
General
Our authorized capital stock consists of 310,000,000 shares, consisting of 300,000,000 shares of common stock, $0.0001 par value, and 10,000,000 shares
of preferred stock, $0.0001 par value.
Common Stock
Voting Rights
Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of
directors. Our stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting shares are able
to elect all of the directors. In addition, the affirmative vote of holders of 66-2/3% of the voting power of all of the then outstanding voting stock is required
to take certain actions, including amending certain provisions of our amended and restated certificate of incorporation, such as the provisions relating to
amending our amended and restated bylaws, the classified board and director liability.
Dividends
Subject to preferences that may be applicable to any then outstanding preferred stock, holders of our common stock are entitled to receive dividends, if any,
as may be declared from time to time by our board of directors out of legally available funds.
Liquidation
In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in the net assets legally available for
distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders
of any then outstanding shares of preferred stock.
Rights and Preferences
Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions
applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to and may be adversely affected by
the rights of the holders of shares of any series of our preferred stock that we may designate in the future.
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Fully Paid and Nonassessable
All of our outstanding shares of common stock are fully paid and nonassessable.
Warrants
Public Warrants
Each of our public warrants entitle the registered holder thereof to purchase 0.1112 shares of our common stock at an exercise price of $11.50 per such
fractional share, subject to adjustment as discussed below. Pursuant to that certain Warrant Agreement, dated April 6, 2021, between EQRx and Continental
Stock Transfer & Trust Company (the “Warrant Agreement”), a warrant holder may exercise its public warrants only for a whole number of shares of
common stock. If, upon exercise of the public warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round
down to the nearest whole number the number of shares of common stock to be issued to the warrant holder. The public warrants expire December 17,
2026, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We are not obligated to deliver any shares of common stock pursuant to the exercise of a public warrant and have no obligation to settle such public
warrant exercise unless a registration statement under the Securities Act of 1933, as amended (the “Securities Act”) with respect to the shares of common
stock underlying the public warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below
with respect to registration. No public warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders
seeking to exercise their public warrants, unless the issuance of the shares upon such public warrant exercise is registered or qualified under the securities
laws of the state of the exercising holder, or an exemption is available. In the event that the conditions in the two immediately preceding sentences are not
satisfied with respect to a public warrant, the holder of such public warrant will not be entitled to exercise such public warrant and such public warrant may
have no value and expire worthless.
During any period when we have failed to maintain an effective registration statement covering the shares of common stock issuable upon exercise of the
public warrants, warrant holders have the right to exercise public warrants on a “cashless basis” in accordance with the provisions of the Warrant
Agreement. Notwithstanding the above, if our common stock is at the time of any exercise of a public warrant not listed on a national securities exchange
such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public
warrants who exercise their public warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act (or any successor rule).
Redemption of Warrants When the Price per Share of Common Stock Equals or Exceeds $161.87 — We may redeem the outstanding public warrants:
•
•
•
•
in whole and not in part;
at a price of $0.01 per public warrant;
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
if, and only if, the closing price of the common stock equals or exceeds $161.87 per share (as adjusted) for any 20 trading days within a 30-
trading day period ending three trading days before sending the notice of redemption to warrant holders.
If and when the public warrants become redeemable, we may exercise our redemption right even if we are unable to register or qualify the underlying
securities for sale under all applicable state securities laws.
Redemption of Warrants When the Price per Share of Common Stock Equals or Exceeds $89.93 — We may redeem the outstanding public warrants:
•
in whole and not in part;
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•
•
•
at $0.10 per public warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their
public warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value
of our common stock;
if, and only if, the closing price of our common stock equals or exceeds $89.93 per share (as adjusted) for any 20 trading days within the 30-
trading day period ending three trading days before we send the notice of redemption to the warrant holders; and
if the closing price of our common stock for any 20 trading days within a 30-trading day period ending three trading days before we send notice
of redemption to the warrant holders is less than $161.87 per share (as adjusted), the private warrants (as defined below) must also be
concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
If the foregoing conditions are satisfied and we issue a notice of redemption of the public warrants, each warrant holder will be entitled to exercise its
public warrant prior to the scheduled redemption date. However, the price of our common stock may fall below the $161.87 redemption trigger price as
well as the warrant exercise price after the redemption notice is issued.
Redemption Procedures and Cashless Exercise. If we call the public warrants for redemption as described above, our management will have the option to
require any holder that wishes to exercise its public warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their
public warrants on a “cashless basis,” our management will consider, among other factors, its cash position, the number of public warrants that are
outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of common stock issuable upon the exercise of the public
warrants. If our management takes advantage of this option, all holders of public warrants would pay the exercise price by surrendering their public
warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock
underlying the public warrants, multiplied by the difference between the exercise price of the public warrants and the “fair market value” (defined below)
by (y) the fair market value. The “fair market value” means the average reported last sale price of our common stock for the ten trading days ending on the
third trading day prior to the date on which the notice of redemption is sent to the holders of public warrants. If our management takes advantage of this
option, the notice of redemption will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of
the public warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be
issued and thereby lessen the dilutive effect of a warrant redemption.
A holder of a public warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise
such public warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual
knowledge, would beneficially own in excess of 4.9% or 9.8% (as specified by the holder) of the shares of our common stock outstanding immediately
after giving effect to such exercise.
Anti-dilution Adjustments. If the number of outstanding shares of common stock is increased by a stock dividend payable in shares of common stock, or by
a split-up of shares of common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of
shares of common stock issuable on exercise of each public warrant will be increased in proportion to such increase in the outstanding shares of common
stock. A rights offering to holders of common stock entitling holders to purchase shares of common stock at a price less than the fair market value (defined
below) will be deemed a stock dividend of a number of shares of common stock equal to the product of (i) the number of shares of common stock actually
sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for common
stock) and (ii) one (1) minus the quotient of (x) the price per share of common stock paid in such rights offering divided by (y) the fair market value. For
these purposes, (i) if the rights offering is for securities convertible into or exercisable for common stock, in determining the price payable for common
stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and
(ii) fair market value means the volume weighted average price of common stock as reported during the ten (10) trading day period ending on the trading
day prior to the first date on which the shares of common stock trade on the applicable exchange or in the applicable market, regular way, without the right
to receive such rights.
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In addition, if we, at any time while the public warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other
assets to the holders of common stock on account of such shares of common stock (or other shares of our capital stock into which the public warrants are
convertible), other than (a) as described above or (b) certain ordinary cash dividends, then the public warrant exercise price will be decreased, effective
immediately after the effective date of such event, by the amount of cash and/or the fair market value as determined by our board of directors in good faith
of any securities or other assets paid on each share of common stock in respect of such event.
If the number of outstanding shares of our common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of
common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the
number of shares of common stock issuable on exercise of each public warrant will be decreased in proportion to such decrease in outstanding shares of
common stock.
Whenever the number of shares of common stock purchasable upon the exercise of the warrants is adjusted, as described above, the public warrant exercise
price will be adjusted (to the nearest cent) by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of
which will be the number of shares of common stock purchasable upon the exercise of the public warrants immediately prior to such adjustment, and (y)
the denominator of which will be the number of shares of common stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of common stock (other than those described above or that solely affects the par
value of such shares of common stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or
merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of our
common stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially
as an entirety in connection with which we are dissolved, the holders of the public warrants will thereafter have the right to purchase and receive, upon the
basis and upon the terms and conditions specified in the public warrants and in lieu of the shares of our common stock immediately theretofore purchasable
and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash)
receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of
the public warrants would have received if such holder had exercised their public warrants immediately prior to such event. However, if such holders were
entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind
and amount of securities, cash or other assets for which each public warrant will become exercisable will be deemed to be the weighted average of the kind
and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or
redemption offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made by us in connection with
redemption rights held by our stockholders) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together
with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act (or any successor rule)) of which such maker is a part, and
together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act (or any successor rule)) and any members
of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act (or any
successor rule)) more than 50% of the outstanding shares of common stock, the holder of a public warrant will be entitled to receive the highest amount of
cash, securities or other property to which such holder would actually have been entitled as a stockholder if such warrant holder had exercised the public
warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the common stock held by such holder had been purchased
pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent
as possible to the adjustments provided for in the Warrant Agreement. Additionally, if less than 70% of the consideration receivable by the holders of
common stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities
exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the
registered holder of the public warrant properly exercises the public warrant within thirty days following public disclosure of the consummation of such
applicable event by us pursuant to a Current Report on Form 8-K filed with the Securities and Exchange Commission, the public warrant exercise
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price will be reduced as specified in the Warrant Agreement based on the per share consideration minus Black-Scholes warrant value (as defined in the
Warrant Agreement) of the public warrant.
The public warrants were issued in registered form under the Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent,
and EQRx. On November 9, 2023, the public warrants became securities of the Company and Equiniti Trust Company, LLC became the warrant agent. You
should review a copy of the Warrant Agreement, which is incorporated by reference as an exhibit to Annual Report on Form 10-K to which this Exhibit 4.3
is filed as an exhibit, for a complete description of the terms and conditions applicable to the public warrants. The Warrant Agreement provides that the
terms of the public warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the
vote or written consent by the holders of at least 50% of the then-outstanding public warrants to make any change that adversely affects the interests of the
registered holders of public warrants.
The public warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent (which
is currently Equiniti Trust Company, LLC), with the exercise form on the reverse side of the warrant certificate completed and executed as indicated,
accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by good certified check, good bank draft or by wire of
immediately available funds, for the number of public warrants being exercised. The warrant holders do not have the rights or privileges of holders of
common stock until they exercise their public warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of
the public warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Private Placement Warrants
Each of our private warrants entitle the registered holder thereof to purchase 0.1112 shares of our common stock at an exercise price of $11.50 per such
fractional share, subject to adjustment. If, upon exercise of the private warrants, a holder would be entitled to receive a fractional interest in a share, we
will, upon exercise, round down to the nearest whole number the number of shares of common stock to be issued to the warrant holder. The terms of the
private warrants are substantially the same as to the public warrants; provided, that, except as described above in the discussion of the redemption of public
warrants when the price per share of our common stock equals or exceeds $89.93, the private warrants are exercisable on a cashless basis and are non-
redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the private warrants are held by someone other than
the initial purchasers or their permitted transferees, the private warrants are redeemable by the Company and exercisable by such holders on the same basis
as the public warrants.
Earn-Out Shares
There are 5,560,000 earn-out shares (the “Earn-Out Shares”) of common stock outstanding and held in escrow that may become tradeable upon the
achievement of certain stock price-based vesting conditions in accordance with the terms of the Agreement and Plan of Merger dated August 5, 2021, by
and among EQRx, Inc. (f/k/a CM Life Sciences III Inc.), Clover III Merger Sub Inc. and EQRx International, Inc. (f/k/a EQRx, Inc.) and certain ancillary
agreements related to the Earn-Out Shares; however, persons with rights to approximately 82% of the Earn-Out Shares have signed and delivered waiver
and release agreements to us pursuant to which, among other things, they have waived their respective rights to receive any such Earn-Out Shares to which
they may have been entitled upon the occurrence of any vesting condition described below.
Seventy percent of the Earn-Out Shares will vest and be released from escrow (if ever) on the date on which the closing price of our common stock equals
or exceeds $112.41 on any 20 trading days in any 30 consecutive trading-day period, and the remaining 30% of Earn-Out Shares will vest and be released
from escrow (if ever) on the date on which the closing price of our common stock equals or exceeds $148.38 on any 20 trading days in any 30 consecutive
trading-day period, in each case provided such vesting occurs prior to December 17, 2024, provided, that in the event that certain change in control events
occur prior to December 17, 2024 pursuant to which we or any of our stockholders have the right to receive, directly or indirectly, cash, securities or other
property attributing a value of at least $112.41 (with respect to 70% of the Earn-Out Shares) or $148.38 (with respect to the remaining 30% of the Earn-Out
Shares) per share of common stock, then such Earn-Out Shares, as applicable, shall be deemed to have vested immediately prior to such change in control
event and will subsequently be released from escrow. Earn-Out Shares are issued and outstanding and will be automatically forfeited for no consideration if
an applicable
5
vesting condition has not occurred with respect to such Earn-Out Shares by and including December 17, 2024. The Earn-Out Shares generally may not be
transferred until the applicable vesting conditions have occurred.
Registration Rights
Under our amended and restated investors’ rights agreement, certain holders of shares of our common stock, or their transferees, have the right to require us
to register their shares under the Securities Act so that those shares may be publicly resold, those holders, or their transferees, have the right to include their
shares in any registration statement we file, in each case as described below. The shares subject to such registration rights are referred to as registrable
securities.
Form S-1 Demand Registration Rights
Holders of registrable securities are entitled to certain Form S-1 demand registration rights.
Beginning on August 11, 2020, the holders of at least a majority of the registrable securities can request that we register all or a portion of their shares, so
long as such holders request that we register at least 40% of the registrable securities. These stockholders may make up to two requests for registration on
Form S-1.
Form S-3 Demand Registration Rights
Holders of registrable securities are entitled to certain Form S-3 demand registration rights. If we are eligible to use a Form S-3 registration statement, the
holders of at least 20% of the registrable securities can request that we register all or a portion of their shares on a Form S-3 registration statement if the
anticipated aggregate offering price is at least $5.0 million, net of certain expenses related to the sale of the shares. These stockholders may make unlimited
requests for registration on Form S-3, provided that we are not obligated to effect, or take any action to effect, a registration on Form S-3 if we have
effected two registrations on Form S-3 pursuant to requests by these stockholders within the 12-month period immediately preceding such request.
Piggyback Registration Rights
In the event that we determine to register any of our securities under the Securities Act (subject to certain exceptions), either for our own account or for the
account of other security holders, the holders of the holders of the registrable securities are entitled to certain “piggyback” registration rights allowing the
holders to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration
statement under the Securities Act, other than with respect to certain registrations, including related to the sale of securities to employees pursuant to
employee benefit plans, the offer and sale of debt securities, or a Securities and Exchange Commission Rule 145 transaction, the holders of the registrable
securities are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares
included in the registration, to include their shares in the registration. In an underwritten offering, the underwriters have the right, subject to specified
conditions, to limit the number of shares such holders may include.
Expenses of Registration
We will pay the registration expenses, excluding certain expenses related to the sale of shares, of the holders of the shares registered pursuant to the Form
S-1 demand, Form S-3 demand and piggyback registration rights described above, including the reasonable expenses of one counsel for the selling holders
not to exceed $25,000.
Expiration of Registration Rights
The Form S-1 demand, Form S-3 demand and piggyback registration rights described above will terminate, with respect to any particular stockholder, upon
the earlier of (i) February 18, 2025, (ii) the date that Rule 144 or another similar exemption under the Securities Act is available to such stockholder for the
sale of all of such stockholder’s shares without limitation during a three-month period, or (iii) upon the consummation of a merger, consolidation or the sale
of substantially all of our assets.
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Anti-Takeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation, Our Amended and Restated Bylaws and
Delaware Law
Some provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could
make the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or
removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions
that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the
market price for our shares.
These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also
designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased
protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Delaware Anti-Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed “interested stockholders” from engaging in a
“business combination” with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless
the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another
prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, beneficially owns, or within
three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business
combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this
provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, such as discouraging takeover
attempts that might result in a premium over the market price of our common stock.
Undesignated Preferred Stock
The ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of our company.
Special Stockholder Meetings
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that a special meeting of stockholders may be called
only by our board of directors, or by our President or Chief Executive Officer.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election
as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.
Elimination of Stockholder Action by Written Consent
Our amended and restated certificate of incorporation and our amended and restated bylaws eliminate the right of stockholders to act by written consent
without a meeting.
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Classified Board; Election and Removal of Directors; Filling Vacancies
Our board of directors is divided into three classes. The directors in each class serve for a three-year term, one class being elected each year by our
stockholders, with staggered three-year terms. Only one class of directors is elected at each annual meeting of our stockholders, with the other classes
continuing for the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, our stockholders holding
a majority of the shares of common stock outstanding are able to elect all of our directors. Our amended and restated certificate of incorporation provides
for the removal of any of our directors only for cause and requires a stockholder vote by the holders of at least a 66-2/3% of the voting power of the then
outstanding voting stock.
Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of the board, may only
be filled by a resolution of the board of directors unless the board of directors determines that such vacancies shall be filled by the stockholders. This
system of electing and removing directors and filling vacancies may tend to discourage a third party from making a tender offer or otherwise attempting to
obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors.
Choice of Forum
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the
sole and exclusive forum for (i) any state law derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a
fiduciary duty owed by any of our directors or officers to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any
provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws or (iv) any
action asserting a claim against us governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to
enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further
that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be
brought in another state or federal court sitting in the State of Delaware. Our amended and restated bylaws also provide that the federal district courts of the
United States of America will be the exclusive forum for the resolution of any complaint asserting a cause or causes of action under the Securities Act.
Such provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint
and any other professional or entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any
part of the documents underlying the offering. Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes
stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our
directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be
deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.
Amendment of Certificate of Incorporation Provisions
The amendment of any of the above provisions, except for the provision making it possible for our board of directors to issue undesignated preferred stock,
would require approval by a stockholder vote by the holders of at least a 66-2/3% of the voting power of the then outstanding voting stock.
The provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation and our amended and restated bylaws
could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the
market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of
preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may
otherwise deem to be in their best interests.
8
Nasdaq Global Select Market Listing
Our common stock and public warrants are listed on the Nasdaq Global Select Market under the symbols “RVMD” and “RVMDW,” respectively.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock and warrants is Equiniti Trust Company, LLC. The transfer agent and registrar’s address is 6201 15th
Avenue, Brooklyn, New York 11219.
9
Composite Agreement and Plan of Merger
Exhibit 4.5
Agreement and Plan of Merger, dated as of August 5, 2021, as amended September 21, 2021 and October 28, 2021, by and among
CM Life Sciences III, Inc., Clover III Merger Sub, Inc., and EQRx, Inc. (composite copy incorporating the Agreement and Plan of Merger,
dated as of August 5, 2021, Amendment to Agreement and Plan of Merger, dated as of September 21, 2021, and Amendment to Agreement
and Plan of Merger, dated as of October 28, 2021).
Each reference in the Agreement and Plan of Merger to “this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein,” or words of
like import, and each reference to the Agreement and Plan of Merger in any other agreements, documents, or instruments executed and
delivered pursuant to, or in connection with, the Transaction Agreements, will mean and be a reference to the Agreement and Plan of
Merger, as amended by the Amendment to Agreement and Plan of Merger.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CM LIFE SCIENCES III INC.,
CLOVER III MERGER SUB INC.,
and
EQRX, INC.
DATED AS OF August 5, 2021
Schedules and Exhibits
Schedule A — Defined Terms
Exhibit A — Form of Stockholder Support Agreement
Exhibit B — Form of Stock Option and Incentive Plan
Exhibit C — Form of Employee Stock Purchase Plan
Exhibit D — Form of Second Amended and Restated Certificate of Incorporation of Parent
Exhibit E — Form of Amended and Restated Registration Rights Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of August 5, 2021, by and among CM Life Sciences III
Inc., a Delaware corporation (“Parent”), Clover III Merger Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Parent
(“Merger Sub”), and EQRx, Inc., a Delaware corporation (the “Company”). Each of the Company, Parent and Merger Sub shall individually be
referred to herein as a “Party” and, collectively, the “Parties.” The term “Agreement” as used herein refers to this Agreement and Plan of
Merger, as the same may be amended from time to time, and all schedules, exhibits and annexes hereto (including the Company Disclosure
Letter and the Parent Disclosure Letter, as defined herein). Defined terms used in this Agreement are listed alphabetically in Schedule A,
together with the section and, if applicable, subsection in which the definition of each such term is located.
RECITALS
WHEREAS, Parent is a blank check company incorporated in Delaware for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of
the State of Delaware (the “DGCL”) and other applicable Legal Requirements (collectively, as applicable based on context, the “Applicable
Legal Requirements”), the Parties intend to enter into a business combination transaction by which Merger Sub will merge with and into the
Company (the “Merger”), with the Company being the surviving corporation of the Merger (the Company, in its capacity as the surviving
corporation of the Merger, is sometimes referred to as the “Surviving Corporation”).
WHEREAS, for U.S. federal income tax purposes (and for purposes of any applicable state or local Tax Legal Requirements that
follows the U.S. federal income tax treatment), each of the Parties intends that the Merger will constitute a transaction that qualifies as a
“reorganization” within the meaning of Section 368(a) of the Code and any comparable provision of state or local Tax Legal Requirements
(the “Intended Tax Treatment”), and that this Agreement be, and hereby is, adopted as a “plan of reorganization” for the purposes of Section
368 of the Code and Treasury Regulations Section 1.368-2(g).
WHEREAS, the board of directors of the Company has unanimously: (a) determined that it is in the best interests of the Company and
the stockholders of the Company, and declared it advisable, to enter into this Agreement providing for the Merger in accordance with the
DGCL; (b) approved this Agreement and the Transactions, including the Merger in accordance with the DGCL, on the terms and subject to
the conditions of this Agreement; and (c) adopted a resolution recommending the plan of merger set forth in this Agreement be adopted by
the stockholders of the Company.
WHEREAS, following execution of this Agreement, the Company shall seek to obtain and deliver to Parent as promptly as practicable,
and in any event no later than forty-eight (48) hours following execution of this Agreement (the “Company Stockholder Approval Deadline”):
(a) a stockholder voting and support agreement (the “Stockholder Voting and Support Agreement”) in the form attached hereto as Exhibit A
executed by the Company Stockholders set forth on Schedule 1.1-A of the Company Disclosure Letter and (b) a lock-up letter agreement
(the “Lock-Up Letter”) executed by the Company Stockholders set forth on Schedule 1.1-B of the Company Disclosure Letter.
WHEREAS, the board of directors of Parent has: (a) determined that it is in the best interests of Parent and the stockholders of Parent,
and declared it advisable, to enter into this Agreement providing for the Merger in accordance with the DGCL; (b) determined that the fair
market value of the Company is equal to at least eighty percent (80%) of the amount held in the Trust Account (excluding any deferred
underwriting commissions and taxes payable on interest earned) as of the date hereof; (c) approved this Agreement and the Transactions,
including the Merger in accordance with the DGCL, on the terms and subject to the conditions of this Agreement; and (d) adopted a
resolution recommending the plan of merger set forth in this Agreement be adopted by the stockholders of Parent (the “Parent
Recommendation”).
WHEREAS, prior to the Closing, Parent shall, in each case, subject to obtaining the approval of the Parent Stockholder Matters: (a)
adopt a Stock Option and Incentive Plan in substantially the form attached hereto as Exhibit B (as such form may be modified in accordance
with Section 7.18) (the “LTIP”), (b) adopt an employee stock purchase plan in substantially the form attached hereto as Exhibit C (as such
form may be modified in accordance with Section 7.18) (the “ESPP”), and (c) adopt the Second Amended and Restated Certificate of
Incorporation of Parent in the form attached hereto as Exhibit D (the “Parent A&R Charter”).
WHEREAS, on or about the date hereof, Parent has obtained commitments from the Equity Financing Investors for equity financing
pursuant to certain subscription agreements, with such equity financings to be consummated immediately prior to the consummation of the
Transactions.
WHEREAS, in connection with the consummation of the Merger, Parent and the Company Stockholders will enter into an amended
and restated Registration Rights Agreement (the “A&R Registration Rights Agreement”) substantially in the form attached hereto as Exhibit
E.
WHEREAS, as a condition and inducement to the Company’s willingness to enter into this Agreement, simultaneously with the
execution and delivery of this Agreement, the Sponsor has executed and delivered to the Company the Sponsor Support Agreement (as
defined below) pursuant to which the Sponsor has agreed to, among other things, vote to adopt and approve this Agreement and the other
documents contemplated hereby and the transactions contemplated hereby and thereby.
NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
THE CLOSING TRANSACTIONS
Section 1.1 Closing. Unless this Agreement shall have been terminated pursuant to Section 9.1, the consummation of the Transactions
(the “Closing”), other than the filing of the Certificate of Merger (as defined below), shall take place by electronic exchange of documents and
signatures at a time and date to be specified in writing by the Parties, which shall be no later than the second (2nd) Business Day after the
satisfaction or waiver of the conditions set forth in Article VIII (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions), or at such other time, date and location as the Parties agree in writing
(the date on which the Closing occurs, the “Closing Date”). The Parties agree that the Closing signatures may be transmitted by email pdf
files.
Section 1.2 Parent Financing Certificate. Not more than two (2) Business Days prior to the Closing, Parent shall deliver to the
Company written notice (the “Parent Financing Certificate”) setting forth: (a) the aggregate amount of cash proceeds that will be required to
satisfy any exercise of the Parent Stockholder Redemptions; (b) the amount of Parent Cash and Parent Transaction Costs as of the Closing;
(c) confirmation that the aggregate amount of the equity financing equal to the Equity Financing Amount was committed to Parent by the
Equity Financing Agreements; and (d) the number of shares of Parent Class A Stock to be outstanding as of the Closing after giving effect to
the Parent Stockholder Redemptions, any forfeitures of shares of Parent Class A Stock by the Sponsor pursuant to that certain Sponsor
Forfeiture Agreement, dated as of the date hereof, between the Parent and the Company (the “Sponsor Forfeiture Agreement”), and the
issuance of shares of Parent Class A Stock pursuant to the Equity Financing Agreements.
Section 1.3 Closing Documents.
(a) At the Closing, Parent or Merger Sub, as applicable, shall deliver to the Company:
(i) a certified copy of the Parent A&R Charter;
(ii) a copy of the A&R Registration Rights Agreement, duly executed by Parent, Sponsor and the other existing parties thereto;
(iii) copies of resolutions and actions taken by Parent’s and Merger Sub’s board of directors and stockholders in connection with
the approval of this Agreement and the Transactions;
(iv) written resignations in forms reasonably satisfactory to the Company, dated as of the Closing Date and effective as of the
Closing executed by the officers and directors of Merger Sub and the officers and directors of Parent who will not retain such positions
upon the Closing, as mutually agreed by Parent and the Company or as otherwise stated herein;
(v) a duly executed counterpart of the Earn-Out Escrow Agreement from a representative of Parent designated prior to the
Closing;
(vi) the Indemnification Agreements, duly executed by Parent; and
(vii) all other documents, instruments or certificates required to be delivered by Parent at or prior to the Closing pursuant to
Section 8.2.
(b) At the Closing, the Company shall deliver to Parent:
(i) a copy of the Certificate of Merger, duly executed by the Company;
(ii) a copy of the A&R Registration Rights Agreement, duly executed by parties mutually agreed upon by Parent and the
Company between the date hereof and the Closing;
(iii) a duly executed counterpart of the Earn-Out Escrow Agreement from a representative of the Company that will be an officer
of Parent following the Closing;
(iv) copies of resolutions and actions taken by the Company’s board of directors and the Company Stockholders in connection
with the approval of this Agreement and the Transactions;
(v) a schedule reflecting: (A) the calculation, as of the Closing, of the Aggregate Company Share Amount, Total Outstanding
Company Shares, each Company Stockholder’s Total Stockholder Outstanding Shares and the Per Share Amount; (B) the portion of
the Closing Number of Securities issuable to each Company Stockholder at Closing pursuant to Section 2.7(a); and (C) each Company
Stockholder’s Earn-Out Pro Rata Share of the Earn-Out Shares to be issued upon the occurrence of the Triggering Events in
accordance with Article III; and
(vi) all other documents, instruments or certificates required to be delivered by the Company at or prior to the Closing pursuant
to Section 8.3.
Section 1.4 Closing Transactions. At the Closing and on the Closing Date, the Parties shall cause the consummation of the following
transactions in the following order, upon the terms and subject to the conditions of this Agreement:
(a) Parent shall make any payments in the aggregate amount of cash proceeds that will be required to satisfy any exercise of the
Parent Stockholder Redemptions.
(b) Parent shall pay, or cause to be paid, all Parent Transaction Costs and Company Transaction Costs to the applicable payees, to
the extent not paid prior to the Closing.
(c) The certificate of merger with respect to the Merger shall be prepared and executed in accordance with the relevant provisions of
the DGCL (the “Certificate of Merger”) and filed with the Secretary of State of the State of Delaware.
(d) Parent shall deposit with the Exchange Agent (or cause to be deposited therewith) the Closing Number of Securities.
(e) Parent shall deposit with the Continental (or cause to be deposited therewith) the Earn-Out Shares.
ARTICLE II
THE MERGER
Section 2.1 Effective Time. Subject to the terms and subject to the conditions of this Agreement, on the Closing Date the Company and
Merger Sub shall cause the Merger to be consummated by filing the Certificate of Merger with the Secretary of State of the State of
Delaware, in accordance with the applicable provisions of the DGCL (the time of such filing, or such later time as may be agreed in writing by
the Company and Parent and specified in the Certificate of Merger, being the “Effective Time”).
Section 2.2 The Merger. At the Effective Time, upon the terms and subject to the conditions of this Agreement and in accordance with
the applicable provisions of the DGCL, Merger Sub and the Company shall consummate the Merger, pursuant to which Merger Sub shall be
merged with and into the Company, following which the separate corporate existence of Merger Sub shall cease and the Company shall
continue as the Surviving Corporation after the Merger and as a direct, wholly-owned subsidiary of Parent.
Section 2.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate
of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of Merger Sub and the
Company shall become the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the
Surviving Corporation, which shall include the assumption by the Surviving Corporation of any and all agreements, covenants, duties and
obligations of Merger Sub and the Company set forth in this Agreement to be performed after the Effective Time.
Section 2.4 Governing Documents. Subject to Section 7.13, at the Effective Time, the certificate of incorporation and bylaws of the
Surviving Corporation shall be amended to read the same as the certificate of incorporation and bylaws of the Merger Sub as in effect
immediately prior to the Effective Time, except that the name of the Surviving Corporation shall be “EQRx Sub, Inc.” (or such other name
mutually agreed by the Parties).
Section 2.5 Directors and Officers of the Surviving Corporation. Immediately after the Effective Time, the board of directors and
executive officers of the Surviving Corporation shall be the board of directors and executive officers of the Company as of immediately prior
to the Effective Time.
Section 2.6 Merger Consideration.
(a) Upon the terms and subject to the conditions of this Agreement, the aggregate consideration to be paid to the Company
Stockholders shall be: (i) the Closing Merger Consideration; and (ii) the contingent right to receive the Earn-Out Shares following the Closing
in accordance with Article III (collectively, the “Total Consideration”).
(b) The Closing Merger Consideration shall be issued in the form of the Closing Number of Securities.
Section 2.7 Effect of the Merger on the Company Common Stock and Company Preferred Stock. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub,
the Company, the Company Stockholders or the holders of any of the securities of Parent, the following shall occur:
(a) Each share of Company Common Stock and Company Preferred Stock (other than Excluded Shares and Dissenting Shares)
issued and outstanding immediately prior to the Effective Time will be cancelled and automatically deemed for all purposes to represent the
right to receive a portion of the Total Consideration, with each Company Stockholder (as applicable) being entitled to receive:
(i) a number of shares of Parent Class A Stock equal to the quotient of: (A) (1) the product of (x) such Company Stockholder’s
Total Stockholder Outstanding Shares multiplied by (y) the Per Share Amount divided by (B) $10.00; and
(ii) its Earn-Out Pro Rata Share of any Earn-Out Shares in accordance with Article III, subject to adjustment in accordance with
Section 2.7(e);
in each case, without interest, upon delivery of the documents required pursuant to Section 2.8. As of the Effective Time, each Company
Stockholder shall cease to have any other rights in and to the Company or Surviving Corporation, and each Certificate relating to the
ownership of shares of Company Common Stock and Company Preferred Stock (other than Excluded Shares) shall thereafter represent only
the right to receive the applicable portion of the Total Consideration.
(b) Notwithstanding anything in this Agreement to the contrary, no fraction of a share of Parent Class A Stock will be issued by virtue of
the Merger. Any fractional shares that would otherwise be issued will be rounded down to the nearest whole share of Parent Class A Stock.
(c) Each issued and outstanding share of common stock of Merger Sub shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $0.0001 per share, of the Surviving Corporation, which shall constitute the only
outstanding shares of capital stock of the Surviving Corporation. From and after the Effective Time, all certificates representing the common
stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into
which they were converted in accordance with the immediately preceding sentence.
(d) Each share of Company Common Stock and Company Preferred Stock held in the Company’s treasury or owned by Parent,
Merger Sub or the Company immediately prior to the Effective Time (each an “Excluded Share”), shall be cancelled and no consideration
shall be paid or payable with respect thereto.
(e) The numbers of shares of Parent Class A Stock that the Company Stockholders are entitled to receive as a result of the Merger,
and each other amount contained herein which is based upon the number of shares of Parent Class A Stock, and as otherwise contemplated
by this Agreement shall be adjusted to reflect appropriately the effect of any stock split, split-up, reverse stock split, stock dividend or
distribution (including any dividend or distribution of securities convertible into Parent Class A Stock), extraordinary cash dividend,
reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Parent Class A Stock
occurring on or after the date hereof and prior to the Closing.
Section 2.8 Surrender of Company Certificates and Disbursement of Closing Consideration.
(a) Subject to this Section 2.8, at the Effective Time, Parent shall deliver, or cause to be delivered to each Company Stockholder
portion of the Total Consideration to which such Company Stockholder is entitled pursuant to Section 2.7(a) and Section 2.7(a)(ii)
(collectively, the “Closing Consideration”).
(b) Prior to the Effective Time, unless otherwise agreed by the Parties, Parent shall appoint a commercial bank or trust company
reasonably acceptable to the Company (the “Exchange Agent”) for the purpose of exchanging Certificates for each Company Stockholder’s
portion of the Closing Consideration.
(c) At the Effective Time, Parent shall deposit with the Exchange Agent and make available the Closing Number of Securities. At the
Effective Time, Parent shall deliver irrevocable instructions to the Exchange Agent to deliver the Closing Consideration in the manner it is
contemplated to be issued or paid pursuant to this Article II.
(d) Promptly after the Effective Time (and in any event within five (5) Business Days thereafter), the Exchange Agent shall mail to each
Company Stockholder who has not already received the Surrender Documentation (other than holders of Excluded Shares and Dissenting
Shares): (i) a letter of transmittal in customary form with such other provisions as Parent and the Company may reasonably agree; and (ii)
instructions for submission of such letters or transmittal and other documentation reasonably required by the Exchange Agent (the
“Surrender Documentation”); provided, however, that the Exchange Agent shall not be required to deliver the Surrender Documentation to
any Company Stockholder that has delivered its Surrender Documentation with respect to such Company Stockholder’s Certificates to the
Exchange Agent at least two (2) Business Days prior to the Closing Date. Upon submission of the Surrender Documentation, the Exchange
Agent will deliver to the holder of such Certificate in exchange therefor such holder’s portion of the Closing Consideration in accordance with
Section 2.8(a) hereof, with the Closing Number of Securities being delivered via book-entry issuance (or at the written election of any
Company Stockholder, in certificated form), less any required Tax withholdings as provided in Section 2.9; provided, however, that
if the holder of such Certificate delivers to the Exchange Agent the Surrender Documentation with respect to such Company Stockholder’s
Certificates at least two (2) Business Days prior to the Closing Date, the Exchange Agent shall deliver to the holder of such Certificate in
exchange therefor such holder’s portion of the Closing Consideration covered by such Surrender Documentation in accordance with this
sentence on the Closing Date or as promptly as practicable thereafter. The Certificate so surrendered shall forthwith be cancelled. Until so
surrendered, each Certificate shall represent after the Effective Time for all purposes only the right to receive the applicable portion of the
Total Consideration attributable to such Certificate. No interest will be paid or accrued on any amount payable upon due surrender of the
Certificates. In the event of a transfer of ownership of shares of Company Common Stock or Company Preferred Stock that is not registered
in the transfer records of the Company, the applicable portion of the Total Consideration to be delivered upon due surrender of the Certificate
may be issued to such transferee if the Certificate formerly representing such shares of Company Common Stock or Company Preferred
Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer Taxes have been paid or are not applicable.
(e) From and after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of
Company Common Stock or Company Preferred Stock that were outstanding immediately prior to the Effective Time. If, after the Effective
Time, any Certificate is presented to the Surviving Corporation, Parent or the Exchange Agent for transfer, it shall be cancelled and deemed
exchanged for (without interest and after giving effect to any required Tax withholdings as provided in Section 2.9) the portion of the Total
Consideration represented by such Certificate.
(f) Any portion of the Closing Consideration that remains unclaimed by the Company Stockholders for 180 days after the Effective Time
shall be delivered to the Surviving Corporation upon the Surviving Corporation’s written request. Any Company Stockholder who has not
theretofore complied with this Article II shall thereafter look only to the Surviving Corporation for payment of their respective portion of the
Total Consideration (after giving effect to any required Tax withholdings as provided in Section 2.9) upon due submission of the Surrender
Documentation, without any interest thereon. Notwithstanding the foregoing, none of the Surviving Corporation, Parent, the Exchange Agent
or any other Person shall be liable to any former Company Stockholder for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar Legal Requirements.
Section 2.9 Withholding Taxes. Notwithstanding anything in this Agreement to the contrary, Parent, Merger Sub, the Company, the
Surviving Corporation, the Exchange Agent and their Affiliates shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement, any amount required to be deducted and withheld with respect to the making of such payment under
Applicable Legal Requirements; provided, that if Parent, Merger Sub, any of their respective Affiliates, or any party acting on their behalf
determines that any payment to the Company Stockholders hereunder is subject to deduction and/or withholding, then Parent shall provide
notice to the Company (with respect to any withholding required on or before the Closing Date) or the applicable Company Stockholders
(with respect to any withholding required after the Closing Date) as soon as reasonably practicable after such determination; provided,
further, that the parties shall use commercially reasonable efforts to minimize any such deduction and/or withholding. To the extent that
amounts are so withheld and paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. Any amounts so withheld
shall be timely remitted to the applicable Governmental Entity.
Section 2.10 Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation following the Merger with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the officers and directors or
members, as applicable, (or their designees) of the Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary action, so long as such action is not inconsistent with this
Agreement.
Section 2.11 Tax Treatment of the Merger. For U.S. federal income tax purposes (and for purposes of any applicable state or local Tax
that follows the U.S. federal income tax treatment), the Parties will
prepare and file all Tax Returns consistent with the treatment of the Merger as a reorganization within the meaning of Section 368(a) of the
Code (or comparable provision of state and local Tax Legal Requirement) and will not take any inconsistent position on any Tax Return or
during the course of any audit, litigation or other proceeding with respect to Taxes, except as otherwise required by a final “determination”
within the meaning of Section 1313 of the Code. Each Party shall use their respective reasonable best efforts to cause the Merger to qualify
as a reorganization within the meaning of Section 368(a) of the Code. No Party shall take any action, or fail to take any action, that would
reasonably be expected to cause the Merger to fail to qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
Section 2.12 Effect on Company Options and Company Restricted Stock Awards.
(a) Each Company Option that is outstanding as of immediately prior to the Effective Time shall be assumed by Parent and converted
into an option to purchase shares of Parent Class A Stock upon substantially the same terms and conditions as are in effect with respect to
such Company Option immediately prior to the Effective Time, including with respect to vesting, exercisability and termination-related
provisions (each, a “Parent Option”) except that (a) such Parent Option shall provide the right to purchase that whole number of shares of
Parent Class A Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such
Company Option as of immediately prior to the Effective Time multiplied by the Equity Exchange Ratio and (b) the exercise price per share
shall be equal to the exercise price per share of such Company Option in the effect immediately prior to the Effective Time (the exercise price
per share, as so determined, being rounded up to the nearest full cent) divided by the Equity Exchange Ratio; provided, however, that the
conversion of the Company Options will be made in a manner consistent with Treasury Regulation Section 1.424-1, such that such
conversion will not constitute a “modification” of such Company Options for purposes of Section 409A or Section 424 of the Code.
(b) Each Company Restricted Stock Award that is outstanding immediately prior to the Effective Time, shall be cancelled and
converted into a restricted stock award covering a number of shares of Parent Class A Stock (each a “Parent Restricted Stock Award”) equal
to the number of shares of Company Common Stock underlying such Company Restricted Stock Award immediately prior to the Effective
Time multiplied by the Equity Exchange Ratio, upon substantially the same terms and conditions as are in effect with respect to such
Company Restricted Stock Award (including with respect to vesting and termination-related provisions).
(c) The Company shall take all necessary actions to effect the treatment of Company Options and Company Restricted Stock Awards
pursuant to Section 2.12(a) and Section 2.12(b) in accordance with the Company Incentive Plan and the applicable award agreements and
to ensure that no Parent Option may be exercised prior to the effective date of an applicable Form S-8 (or other applicable form, including
Form S-1 or Form S-3) of Parent. The board of directors of the Company shall take all necessary actions, effective as of immediately prior to
the Closing, in order to (i) provide that the unallocated share reserve remaining under the Company Incentive Plan as of the Closing Date
(including any shares subsequently returned to such share reserve as a result of the termination of awards issued under the Company’s
applicable stock plan) shall be included in the share reserve under the LTIP, in accordance with the terms thereof, and (ii) provide that no
new Company Options will be granted under the Company Incentive Plan following the Closing. Prior to the Effective Time, the Company
shall deliver to each holder of a Company Option and unvested Company Restricted Stock Award, a notice, in a form reasonably acceptable
to Parent, setting forth the effect of the Merger on such holder’s Company Options and Company Restricted Stock Awards and describing the
treatment of such Company Options and Company Restricted Stock Awards in accordance with this Section 2.12.
(d) Parent shall take all actions that are necessary for the assumption and conversion of the Company Options and the cancellation
and conversion of the Company Restricted Stock Awards pursuant to Section 2.12. If registration of the issuance of the Parent Options or
Parent Restricted Stock Award is required under the Securities Act, Parent shall file, as promptly as practicable after the date that is sixty
(60) days after the Form 8-K announcing the Closing is filed (or any such earlier date permitted by Applicable Legal Requirements), a
registration statement on Form S-8 with respect to such Parent Options or Parent Restricted Stock Awards and shall use its commercially
reasonable efforts to maintain the effectiveness of
such registration statement for so long as the applicable Parent Options or Parent Restricted Stock Awards remain outstanding and such
registration of the sale of the shares of Parent Class A Common Stock issuable thereunder continues to be required.
Section 2.13 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock or
Company Preferred Stock outstanding immediately prior to the Effective Time and held by a Company Stockholder who has not voted in
favor of the Merger or consented thereto in writing or by electronic transmissions and has properly demanded appraisal for such shares in
accordance with, and who complies in all respects with, Section 262 of the DGCL (such shares, “Dissenting Shares”), shall not be converted
into the right to receive the Closing Merger Consideration and shall instead represent the right to receive payment of the fair value of such
Dissenting Shares in accordance with and to the extent provided by Section 262 of the DGCL. At the Effective Time, (i) all Dissenting Shares
shall be cancelled, extinguished and cease to exist and (ii) the holders of Dissenting Shares shall be entitled to only such rights as may be
granted to him, her or it under the DGCL. If any such Company Stockholder fails to perfect or otherwise waives, withdraws or loses such
Company Stockholder’s right to appraisal under Section 262 of the DGCL or a court of competent jurisdiction shall determine such holder is
not entitled to the relief provided by Section 262 of the DGCL, then the right of such holder to be paid the fair value of such Dissenting
Shares under Section 262 of the DGCL shall cease and such Dissenting Shares shall be deemed to have been converted, as of the Effective
Time, into and shall only represent the right to receive the Closing Merger Consideration upon the surrender of such shares in accordance
with this Article II. The Company shall give Parent reasonably prompt notice of any demands received by the Company for appraisal of
shares of Company Common Stock or Company Preferred Stock, attempted withdrawals of such demands and any other instruments served
pursuant to the DGCL and received by the Company relating to rights to be paid the fair value of Dissenting Shares, and Parent shall have
the right to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company
shall not, except with the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed), make any
payment with respect to, or settle or compromise or offer to settle or compromise, any such demands or waive any failure to timely deliver a
written demand for appraisal or otherwise comply with the provisions under Section 262 of the DGCL, or agree or commit to do any of the
foregoing.
Section 3.1 Issuance of Earn-Out Shares.
ARTICLE III
EARN-OUT
(a) Following the Closing, and as additional consideration for the Merger and the other Transactions, Parent shall deliver or cause to
be delivered from the Earn-Out Shares (including any Earn-Out Shares accumulated in the Forfeiture Pool as of the occurrence of Triggering
Event I or Triggering Event II, as applicable) in accordance with the Earn-Out Escrow Agreement to each applicable Company Stockholder
(other than holders of Dissenting Shares) and Earn-Out Service Provider (in accordance with its respective Earn-Out Pro Rata Share and, in
the case of the Earn-Out Service Providers, in accordance with the terms of the applicable Earn-Out Award Agreement), upon the terms and
subject to the conditions set forth in this Agreement and the other Transaction Agreements and, in the case of the Earn-Out Service
Providers, subject to the additional requirements set forth in Section 3.4 and the applicable Earn-Out Award Agreement:
(i) upon the occurrence of Triggering Event I, a one-time issuance of 35,000,000 shares of Parent Class A Stock (the “Triggering
Event I Earn-Out Shares”); and
(ii) upon the occurrence of Triggering Event II, an additional (one-time issuance) of 15,000,000 shares of Parent Class A Stock
(the “Triggering Event II Earn-Out Shares”, together with the Triggering Event I Earn-Out Shares, the “Earn-Out Shares”).
(b) For the avoidance of doubt, (i) the Earn-Out Shares shall be, in each case, equitably adjusted for stock splits, reverse stock splits,
stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with
respect to Parent Class A Stock occurring on or after the Closing, (ii) Triggering Event I and Triggering Event II may be achieved at the
same time or over the same overlapping Trading Days, (iii) Earn-Out Shares issued to Company Stockholders that received a Parent
Restricted Stock Award at the Closing may be issued in the form of an additional Parent Restricted Stock Award with substantially the same
terms and conditions as are in effect with respect to such Company Restricted Stock Award (including with respect to vesting and
termination-related provisions), and (iv) in no event shall the total number of Earn-Out Shares issuable to Company Stockholder and Earn-
Out Service Providers exceed 50,000,000 shares of Parent Class A Stock.
Section 3.2 Acceleration Event. If, prior to the expiration of the Earn-Out Period, there is a Change of Control that will result in the
holders of Parent Class A Stock receiving a per share price equal to or in excess of the applicable Common Share Price required in
connection with the Triggering Events (an “Acceleration Event”), then immediately prior to the consummation of such Change of Control (the
“Accelerated Vesting Date”): (a) the Triggering Events that had not previously occurred shall be deemed to have occurred; and (b) Parent
shall deliver or cause to be delivered from the Earn-Out Shares (including any Earn-Out Shares accumulated in the Forfeiture Pool as of the
Accelerated Vesting Date) in accordance with the Earn-Out Escrow Agreement to each applicable Company Stockholder and Earn-Out
Service Providers (in accordance with its respective Earn-Out Pro Rata Share and, in the case of Earn-Out Service Providers, if and to the
extent required in accordance with the applicable Earn-Out Award Agreement), and the recipients of such issued Earn-Out Shares shall be
eligible to participate with respect thereto in such Change of Control. If there is a Change of Control following the Earn-Out Period, then
immediately prior to the consummation of such Change of Control, Parent shall issue the Earn-Out Shares then-accumulated in the
Forfeiture Pool, if any, to the Company Stockholders and Earn-Out Service Providers (in accordance with their respective Earn-Out Pro Rata
Share and, in the case of the Earn-Out Service Providers, if and to the extent required in accordance with the applicable Earn-Out Award
Agreement), and the recipients of such issued Earn-Out Shares shall be eligible to participate with respect thereto in such Change of Control.
Section 3.3 Tax Treatment of Earn-Out Shares. Any issuance of Earn-Out Shares to Company Stockholders, including any delivery of
Earn-Out Shares made upon the occurrence of an Acceleration Event pursuant to Section 3.2, shall be treated as an adjustment to the Total
Consideration by the Parties for Tax purposes, unless otherwise required by Tax law, and such issuance is intended to comply with and shall
be effected in accordance with Rev. Proc. 84-42, 1984-1 C.B. 521.
Section 3.4 Earn-Out Service Providers. Earn-Out Shares issuable upon the occurrence of a Triggering Event may be issued to Earn-
Out Service Providers as described in this Section 3.4 rather than to Company Stockholders. The terms of the issuance of the Earn-Out
Shares underlying an award of Earn-Out RSUs to the Earn-Out Service Providers shall be set forth in a written agreement between the
Company and such Earn-Out Service Provider (each, an “Earn-Out Award Agreement”), in a form reasonably acceptable to Parent, which
may provide that the Earn-Out Shares that would otherwise become issuable to an Earn-Out Service Provider pursuant to Section 3.1 shall
remain subject to certain additional vesting conditions as set forth therein, and which may provide for accelerated vesting in the event of a
Change of Control. In the event that an Earn-Out Service Provider does not satisfy the vesting conditions set forth in his or her Earn-Out
Award Agreement, such Earn-Out Service Provider shall be deemed to have forfeited his or her right to receive the applicable Earn-Out
Shares for no consideration. Any such Earn-Out Shares that are so forfeited under the terms of an Earn-Out Award Agreement shall
accumulate in the “Forfeiture Pool” and shall be issued in accordance with Section 3.1 or Section 3.2, as applicable; provided that, for the
avoidance of doubt, no Earn-Out Shares shall be issuable, including those accumulated in the Forfeiture Pool, unless and until the conditions
set forth in Section 3.1 or Section 3.2, as applicable, have been met. The delivery of Earn-Out Shares underlying the Earn-Out RSUs shall be
subject to the payment of any applicable Tax withholdings and compliance with any applicable requirements of the securities and other laws.
Section 3.5 Escrow of Earn-Out Shares.
(a) At the Closing, the Company shall deliver electronically to Continental, the Earn-Out Shares.
(b) Upon receipt of the Earn-Out Shares, Continental will place the Earn-Out Shares in an escrow account established pursuant to an
escrow agreement, in a form mutually agreed by Parent, the Company and Continental (the “Earn-Out Escrow Agreement”).
(c) Promptly upon the occurrence of the Triggering Events, a representative designated prior to the Closing by Parent and Parent shall
jointly prepare and deliver, or cause to be prepared and delivered, in a mutually agreeable written notice to Continental (a “Release Notice”),
which Release Notice shall set forth in reasonable detail the specific release instructions with respect to the Earn-Out Shares, including,
without limitation, the number of Earn-Out Shares to be released and the identity of each Person to whom such Earn-Out Shares shall be
released.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Except as set forth in the letter dated as of the date of this Agreement delivered by the Company to Parent and Merger Sub prior to or
in connection with the execution and delivery of this Agreement (the “Company Disclosure Letter”), the Company hereby represents and
warrants to Parent and Merger Sub as of the date hereof and as of the Closing Date as follows:
Section 4.1 Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing
under the Legal Requirements of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted, except as would not be material to the Group Companies,
taken as a whole. The Company is duly licensed or qualified to do business in each jurisdiction in which the ownership of its property or the
character of its activities is such as to require it to be so licensed or qualified, except where the failure to be so licensed or qualified or in
good standing would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the ability
of the Company to consummate the Transactions or have a Company Material Adverse Effect. Complete and correct copies of the certificate
of incorporation, certificate of designation, stockholders’ rights agreement and by-laws (and any other governing documents or instruments,
collectively, the “Charter Documents”) of the Company as amended and currently in effect, have been made available to Parent or its
representatives.
Section 4.2 Company Subsidiaries.
(a) The Company’s direct and indirect Subsidiaries, together with their jurisdiction of incorporation or organization, as applicable, are
listed on Schedule 4.2(a) of the Company Disclosure Letter (the “Company Subsidiaries”). Each Company Subsidiary has been duly formed
or organized and is validly existing under the Legal Requirements of its respective jurisdiction of incorporation or organization and has the
requisite power and authority to own, lease and operate its assets and properties and to conduct its business as now being conducted,
except where the failure to be so formed, organized or existing, or to have such power and authority, would not, individually or in the
aggregate, reasonably be expected to be material to the Group Companies, taken as a whole. The Company has previously provided to
Parent or its representatives true and complete copies of the Charter Documents of the Company Subsidiaries, as amended and currently in
effect.
(b) Except as set forth on Schedule 4.2(b) of the Company Disclosure Letter, each Company Subsidiary is duly licensed or qualified to
do business and, where applicable, is in good standing as a foreign corporation (or other entity, if applicable) in each jurisdiction in which it is
conducting business, or the operation, ownership or leasing of its property or the character of its activities is such as to require it to be so
licensed or qualified, except where the failure to be so licensed or qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to prevent, materially delay or materially impair the ability of the Company to consummate the Transactions or have
a Company Material Adverse Effect.
Section 4.3 Capitalization.
(a) The authorized capital stock of the Company consists of: (i) 620,000,000 shares of Common Stock, par value $0.0001 of the
Company (the “Company Common Stock”), of which 76,912,028 shares are issued and outstanding as of the date of this Agreement; (ii)
469,955,057 shares of Preferred Stock, par value $0.0001 of the Company, of which (x) 262,070,014 shares have been designated Series A
Preferred Stock of the Company (the “Company Series A Preferred Stock”), all of which are issued and outstanding as of the date of this
Agreement and (y) 207,885,043 shares have been designated Series B Preferred Stock of
the Company (the “Company Series B Preferred Stock”, together with the Company Series A Preferred Stock, the “Company Preferred
Stock”), 207,394,482 of which are issued and outstanding as of the date of this Agreement. All of the issued and outstanding shares of
Company Common Stock and Company Preferred Stock have been duly authorized and validly issued and are fully paid and nonassessable
and have not been issued in violation of any preemptive or similar rights. Each share of Company Common Stock and Company Preferred
Stock has been issued in compliance in all material respects with: (A) Applicable Legal Requirements; and (B) the Company’s Charter
Documents.
(b) The Company has previously provided to Parent a list, dated as of August 3, 2021, that is true and correct as of such date, setting
forth the name of (i) each Company Stockholder and the number and class or series of shares of Company Common Stock and Company
Preferred Stock held by each, and (ii) each holder of any Company Option and Company Restricted Stock Awards granted under the
Company Incentive Plan, the number of Company Options and Company Restricted Stock Awards held by each holder, the class of shares
underlying such Company Options or Company Restricted Stock Award and the applicable exercise price of the Company Options (the
“Capitalization Ledger”). Other than the Company Options and the Company Restricted Stock Awards there are no stock appreciation,
phantom stock, stock-based performance unit, profit participation, restricted stock, restricted stock unit or other equity-based compensation
award or similar rights with respect to the Company. Each Company Option held by a U.S. taxpayer has been granted with an exercise price
that is intended to be no less than the fair market value of the underlying Company Common Stock on the date of grant, as determined in
accordance with Section 409A of the Code or Section 422 of the Code, if applicable. Each Company Option held by a U.S. taxpayer is
intended to be exempt under Section 409A of the Code. Other than the Company Options, the Company has not granted any outstanding
options, warrants, rights or other securities convertible into or exchangeable or exercisable for shares of the Company Common Stock or
Company Preferred Stock, or any other commitments or agreements providing for the issuance of additional shares, the sale of treasury
shares, or for the repurchase or redemption of shares of Company Common Stock or Company Preferred Stock, and there are no
agreements of any kind which may obligate the Company to issue, purchase, register for sale, redeem or otherwise acquire any of its capital
stock. Except for this Agreement, there are no registration rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other
agreements or understandings with respect to the shares of Company Common Stock or Company Preferred Stock.
(c) The outstanding shares of capital stock (or other equity interests) of each of the Company Subsidiaries have been duly authorized
and validly issued and (if applicable) are fully paid and nonassessable (where such concepts are applicable) and have not been issued in
violation of any preemptive or similar rights. The Company or one or more of its wholly owned Subsidiaries own of record and beneficially all
the issued and outstanding shares of capital stock (or other equity interests) of such Company Subsidiaries free and clear of any Liens other
than (i) as may be set forth on Schedule 4.3(c); (ii) for any restrictions on sales of securities under applicable securities laws; and (iii)
Permitted Liens. There are no outstanding options, warrants, rights or other securities convertible into or exercisable or exchangeable for any
shares of capital stock (or other equity interests) of such Company Subsidiaries, any other commitments or agreements providing for the
issuance of additional shares (or other equity interests), the sale of treasury shares, or for the repurchase or redemption of such Company
Subsidiaries’ shares of capital stock (or other equity interests), or any agreements of any kind which may obligate any Company Subsidiary
to issue, purchase, register for sale, redeem or otherwise acquire any of its shares of capital stock (or other equity interests). Except for the
equity interests of the Company Subsidiaries set forth on Schedule 4.2(a) of the Company Disclosure Letter and as otherwise set forth on
Schedule 4.3(c) of the Company Disclosure Letter, neither the Company nor any of the Company Subsidiaries owns, directly or indirectly, any
ownership, equity, profits or voting interest in any Person or have any agreement or commitment to purchase any such interest, and has not
agreed and is not obligated to make nor is bound by any written, oral or other Contract, binding understanding, option, warranty or
undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become obligated to make, any future
investment in or capital contribution to any other entity.
(d) Except as provided for in this Agreement, as a result of the consummation of the Transactions, no shares of capital stock, warrants,
options or other securities of the Company are issuable and no rights in connection with any shares, warrants, options or other securities of
the Company accelerate or otherwise become triggered (whether as to vesting, exercisability, convertibility or otherwise).
Section 4.4 Due Authorization. The Company has all requisite corporate power and authority to: (a) execute, deliver and perform this
Agreement and the other Transaction Agreements to which it is a party; and (b) carry out the Company’s obligations hereunder and
thereunder and to consummate the Transactions (including the Merger), in each case, subject to the consents, approvals, authorizations and
other requirements described in Section 4.5. The execution and delivery by the Company of this Agreement and the other Transaction
Agreements to which it is a party and the consummation by the Company of the Transactions (including the Merger) have been, or in the
case of any Transaction Agreements to be executed at or in connection with the Closing, will be duly and validly authorized by all requisite
action, including approval by the board of directors of the Company and, following receipt of the affirmative vote or consent of the holders of
shares representing a majority of the voting power of the Company required to approve and adopt this Agreement, the Merger and the other
Transactions under the Charter Documents and the DGCL, including, without limitation, the approval of the holders of the Company
Preferred Stock and Company Common Stock, respectively, including the (x) approval of the majority of the holders of the Company
Preferred Stock and the Company Common Stock voting as a single class (on an as converted basis) and (y) approval of fifty-five percent
(55%) of the holders of the outstanding Company Preferred Stock (the Company Series A Preferred Stock and the Company Series B
Preferred Stock voting together as a separate class from the Company Common Stock) (collectively, the “Company Stockholder Approval”),
and no other corporate proceeding on the part of the Company is necessary to authorize this Agreement. This Agreement and the other
Transaction Agreements to which it is a party have been duly and validly executed and delivered by the Company and (assuming this
Agreement constitutes a legal, valid and binding obligation of each of Parent and Merger Sub) constitute or will constitute the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and subject, as to
enforceability, to general principles of equity (collectively, the “Remedies Exception”).
Section 4.5 No Conflict; Governmental Consents and Filings.
(a) Except as set forth on Schedule 4.5(a) of the Company Disclosure Letter, subject to the receipt of the consents, approvals,
authorizations and other requirements set forth in Section 4.5(b), the execution, delivery and performance of this Agreement (including the
consummation by the Company of the Transactions) and the other Transaction Agreements to which the Company is a party by the
Company do not and will not: (i) violate any provision of, or result in the breach of, any Applicable Legal Requirement to which any of the
Group Companies is subject or by which any property or asset of any of the Group Companies is bound; (ii) conflict with or violate the
Charter Documents of any of the Group Companies; (iii) violate any provision of or result in a breach, default or acceleration of, require a
consent under, or create any right to payment under any Company Material Contract or Material Current Government Contract, or terminate
or result in the termination of any Company Material Contract or Material Current Government Contract, or result in the creation of any Lien
under any Company Material Contract or Material Current Government Contract upon any of the properties or assets of any of the Group
Companies, or constitute an event which, after notice or lapse of time or both, would result in any such violation, breach, default,
acceleration, termination or creation of a Lien; or (iv) result in a violation or revocation of any required Approvals, except to the extent that the
occurrence of any of the foregoing items set forth in clauses (iii) or (iv) would not, individually or in the aggregate, reasonably be expected to
prevent, materially delay or materially impair the ability of the Company to consummate the Transactions or have a Company Material
Adverse Effect.
(b) Assuming the truth and completeness of the representations and warranties of Parent contained in this Agreement, no consent,
notice, approval or authorization of, or designation, declaration or filing with, any Governmental Entity is required on the part of the Company
with respect to the Company’s execution, delivery or performance of this Agreement, any of the other Transaction Agreements to which it is a
party or the consummation by the Company of the Transactions (including the Merger), except for: (i) applicable requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) or any similar foreign law; (ii) any consents, notices,
approvals, authorizations, designations, declarations or filings, the absence of which would not reasonably be expected to have a Company
Material Adverse Effect; (iii) compliance with any applicable requirements of the securities laws; (iv) as otherwise disclosed on Schedule
4.5(b); and (v) the filing of the Certificate of Merger in accordance with the DGCL.
Section 4.6 Legal Compliance; Approvals.
(a) Each of the Group Companies has, since the Company’s inception, complied with, and is not currently in violation of, any
Applicable Legal Requirements with respect to the conduct of its business, or the ownership or operation of its business, except for failures to
comply or violations which, individually or in the aggregate, have not been and are not reasonably likely to be material to the Group
Companies, taken as a whole. No written, or to the Knowledge of the Company, oral notice of non-compliance with any Applicable Legal
Requirements has been received since the Company’s inception by any of the Group Companies.
(b) Each Group Company is in possession of all franchises, grants, authorizations, licenses, permits, consents, certificates, approvals
and orders from Governmental Entities (“Approvals”) necessary to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, except where the failure to have such Approvals would not, individually or in the
aggregate, reasonably be expected to be material to the Group Companies, taken as a whole.
Section 4.7 Government Contracts. Schedule 4.7 of the Company Disclosure Letter sets forth a list of each Current Government
Contract in existence as of the date hereof that involves aggregate payments to the Company or any of the Company Subsidiaries that are
reasonably expected to be in excess of $250,000 (each, a “Material Current Government Contract”). Each Material Current Government
Contract was legally awarded to the Company or a Company Subsidiary, as applicable. Each Material Current Government Contract: (i) is a
legal, valid binding obligation of the Company or such Company Subsidiary, as applicable; and (ii) is in full force and effect and enforceable
against the Company or such Company Subsidiary, as applicable, in accordance with its terms.
Section 4.8 Financial Statements.
(a) The Company has previously provided to Parent: (i) the audited consolidated balance sheets and consolidated statements of
operations and comprehensive loss, changes in equity and cash flows of the Group Companies for the twelve-month period ended
December 31, 2020 and December 31, 2019 together with the auditor’s reports thereon (the “Audited Financial Statements”); and (ii) an
unaudited consolidated balance sheet and statements of operations and comprehensive loss and cash flows of the Group Companies as of
and for the six-month period ended June 30, 2021 (the “Interim Financial Statements” and, together with the Audited Financial Statements,
the “Financial Statements”). Except as set forth on Schedule 4.8(a) of the Company Disclosure Letter, the Financial Statements present fairly,
in all material respects, the consolidated financial position and results of operations of the Group Companies as of the dates and for the
periods indicated in such Financial Statements in conformity with GAAP (except in the case of the Interim Financial Statements for the
absence of footnotes and other presentation items and for normal year-end adjustments).
(b) The Company has established and maintained a system of internal controls. To the Knowledge of the Company, such internal
controls are sufficient to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of
the Company’s financial statements for external purposes in accordance with GAAP.
(c) There are no outstanding loans or other extensions of credit made by the Company to any executive officer (as defined in Rule 3b-7
under the Exchange Act) or director of the Company.
Section 4.9 No Undisclosed Liabilities. There is no liability, debt or obligation (absolute, accrued, contingent or otherwise) of any of the
Group Companies of a type required to be reflected or reserved for on a balance sheet prepared in accordance with GAAP, except for
liabilities, debts and obligations: (a) provided for in, or otherwise reflected or reserved for on the Financial Statements or disclosed in the
notes thereto; (b) that have arisen since the date of the most recent balance sheet included in the Financial Statements in the ordinary
course of the operation of business of the Group Companies; (c) incurred in connection with the transactions contemplated by this
Agreement; or (d) which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 4.10 Absence of Certain Changes or Events. Except as contemplated by this Agreement, since December 31, 2020 through
the date of this Agreement, except as required to respond to Pandemic
Measures, each of the Group Companies has conducted its business in the ordinary course consistent with past practice and there has not
been: (a) any Company Material Adverse Effect; (b) any purchase, redemption or other acquisition by the Company of any of the shares of
Company Common Stock, Company Preferred Stock or any other securities of the Company or any options, warrants, calls or rights to
acquire any such Company Common Stock, Company Preferred Stock or other securities, other than pursuant to the terms of a Company
Option, other than the repurchase of unvested shares of Company Common Stock from former Company employees, consultants or other
service providers; (c) any split, combination or reclassification of any of the shares of Company Common Stock or Company Preferred Stock;
(d) any material change by the Company in its accounting methods, principles or practices, except as required by concurrent changes in
GAAP or Applicable Legal Requirements; (e) any change in the auditors of the Company; (f) except as set forth on Schedule 4.10(f) of the
Company Disclosure Letter, any issuance of shares of Company Common Stock or Company Preferred Stock, other than in connection with
the exercise of a Company Option; (g) any revaluation by the Company of any of its assets, including any sale of assets of the Company
other than with respect to sales in the ordinary course of business; or (h) any action taken or agreed upon by any of the Group Companies
that would be prohibited by Section 6.1 (other than clauses (a), (c), (d), (i), (j) and, to the extent related to the foregoing clauses, (n) thereof) if
such action were taken on or after the date hereof without the consent of Parent.
Section 4.11 Litigation. Except as set forth on Schedule 4.11 of the Company Disclosure Letter or as would not be material to the
Group Companies, taken as a whole, as of the date hereof, there are: (a) no pending or, to the Knowledge of the Company, threatened in
writing, Legal Proceedings against any of the Group Companies or any of its properties or assets, or any of the directors or officers of any of
the Group Companies with regard to their actions as such; (b) to the Knowledge of the Company, other than with respect to audits,
examinations or investigations in the ordinary course of business conducted by a Governmental Entity pursuant to a Current Government
Contract, no pending or threatened in writing, audits, examinations or investigations by any Governmental Entity against any of the Group
Companies with regard to their actions as such; (c) no pending or threatened in writing Legal Proceedings by any of the Group Companies
against any third party; (d) no settlements or similar agreements that imposes any material ongoing obligations or restrictions on any of the
Group Companies; and (e) no Orders imposed or, to the Knowledge of the Company, threatened to be imposed upon any of the Group
Companies or any of their respective properties or assets, or any of the directors or officers of any of the Group Companies with regard to
their actions as such.
Section 4.12 Company Benefit Plans.
(a) Schedule 4.12(a) of the Company Disclosure Letter sets forth a complete list of each material Company Benefit Plan, including all
employment contracts or offer letters unless any such arrangement is in a form substantially similar to a form of employment contract or offer
letter identified on Schedule 4.12(a) of the Company Disclosure Letter (which schedule includes a general description of groups of
employees that has entered into agreements on such forms). “Company Benefit Plan” means each “employee benefit plan” (within the
meaning of Section 3(3) of ERISA), and each other retirement, supplemental retirement, deferred compensation, employment, bonus,
incentive compensation, stock purchase, employee stock ownership, equity-based, phantom-equity, profit-sharing, severance, termination
protection, change of control, retention, employee loan, retiree medical or life insurance, educational, employee assistance, fringe benefit and
all other employee benefit plan, policy, agreement, program or arrangement, whether or not subject to ERISA, whether formal or informal,
oral or written, which any Group Company sponsors or maintains for the benefit of its current or former employees, individuals who provide
services and are compensated as individual independent contractors or directors, or with respect to which any Group Company has any
direct or indirect present or future liability, including, without limitation, any liability on account of the Group Company’s affiliation with an
ERISA Affiliate. Notwithstanding anything to the contrary herein, in the case of any representation or warranty contained in this Section 4.12
concerning an employee benefit plan that is a Company Benefit Plan on account of the Company’s affiliation with an ERISA Affiliate, such
representation and warranty is made to the Knowledge of the Company.
(b) With respect to each Company Benefit Plan on Schedule 4.12(a) of the Company Disclosure Letter, the Company has made
available to Parent or its representatives copies of, as applicable: (i) such Company Benefit Plan, or the applicable form listed on Schedule
4.12(a) of the Company Disclosure Letter,
and any trust agreement relating to such plan; (ii) the most recent summary plan description for such Company Benefit Plan for which such
summary plan description is required; (iii) the most recent annual report on Form 5500 and all attachments thereto filed with the Internal
Revenue Service with respect to such Company Benefit Plan (if applicable); (iv) the most recent audited financial statements, and actuarial or
other valuation reports; (v) the most recent determination or opinion letter, if any, issued by the Internal Revenue Service with respect to such
Company Benefit Plan; and (vi) any material non-routine correspondence with any Governmental Entity regarding any Company Benefit Plan
since the Company’s inception.
(c) Except as would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a
whole:
(i) each Company Benefit Plan has been administered in accordance with its terms and all Applicable Legal Requirements,
including ERISA and the Code;
(ii) all contributions required to be made with respect to any Company Benefit Plan on or before the date hereof have been
made;
(iii) no non-exempt “prohibited transaction” (within the meaning of Section 406 of ERISA and Section 4975 of the Code) has
occurred or is reasonably expected to occur with respect to any Company Benefit Plan;
(iv) with respect to any Company Benefit Plan no actions, suits, claims (other than routine claims for benefits in the ordinary
course), audits, inquiries, proceedings or lawsuits are pending, or, to the Knowledge of the Company, threatened against any Company
Benefit Plan, the assets of any of the trusts under such plans or the plan sponsor or administrator, or against any fiduciary of any
Company Benefit Plan with respect to the operation thereof; and
(v) no event has occurred, and to the Knowledge of the Company, no condition exists that would, by reason of the Company’s
affiliation with any of its ERISA Affiliates, subject any Group Company to any material tax, fine, lien, penalty or other liability imposed
by ERISA, the Code or other Legal Requirements
(d) Each Company Benefit Plan which is intended to be qualified within the meaning of Section 401(a) of the Code: (A) has received a
favorable determination or opinion letter as to its qualification; or (B) has been established under a standardized master and prototype or
volume submitter plan for which a current favorable Internal Revenue Service advisory letter or opinion letter has been obtained by the plan
sponsor and is valid as to the adopting employer, and to the Knowledge of the Company, nothing has occurred and no circumstances exist
that would reasonably be expected to result in the loss of the qualification of such plan under Section 401(a) of the Code.
(e) Except as would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a
whole, (i) no Company Benefit Plan covered by Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA (a “Pension Plan”) has
been terminated and no proceedings have been instituted to terminate or appoint a trustee to administer any such plan; (ii) no Pension Plan
has failed to satisfy the minimum funding standard within the meaning of Section 412 of the Code or Section 302 of ERISA, or obtained a
waiver of any minimum funding standard or an extension of any amortization period under Section 412 of the Code or Section 302 or 304 of
ERISA; (iii) no Pension Plan is, or is expected to be, considered an at-risk plan within the meaning of Section 430 of the Code or Section 303
of ERISA; (iv) neither the Company, any of its Subsidiaries, or any of their respective ERISA Affiliates has incurred any unsatisfied withdrawal
liability to any “multiemployer plan” within the meaning of Section (3)(37) of ERISA (“Multiemployer Plan”) and the aggregate liabilities of the
Group Companies to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of
each Multiemployer Plan ended prior to the date hereof, would not, individually or in the aggregate, reasonably be expected to be material to
the Group Companies, taken as a whole and (v) to the Knowledge of the Company, no Multiemployer Plan is in endangered or critical status
under Section 432 of the Code or Section 305 of ERISA. No Group Company nor any of their respective ERISA Affiliates has, within the past
six years, sponsored, contributed to, been obligated to contribute to, or has any current or contingent liability in respect of a “multiple
employer welfare arrangement” within the meaning of Section 3(40) of ERISA.
(f) Except as would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a
whole, with respect to the Company Benefit Plans or their administrators or fiduciaries: (i) no actions, suits or claims (other than routine
claims for benefits in the ordinary course) are pending or, to the Knowledge of the Company, threatened; and (ii) no facts or circumstances
exist that would reasonably be expected to give rise to any such actions, suits or claims.
(g) Except as would not reasonably be expected to result in material liabilities to the Group Companies, taken as a whole, since
December 31, 2020, (i) no Group Company has been party to any proceeding, order, dispute, or claim involving any joint employer or co-
employer causes of action by any individual who was employed or engaged by a third party and providing services to any Group Company;
and (ii) no Group Company has been deemed to be, or to the Knowledge of the Company alleged to be, in a joint-employment, co-
employment, or similar relationship with any third party, with respect to any of the Group Company’s employees or individual independent
contractors
(h) None of the Company Benefit Plans provides for, and the Group Companies have no liability in respect of, post-retiree or post-
employment health, welfare or life insurance benefits or coverage for any participant or any beneficiary of a participant, except as may be
required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or similar state or other Legal Requirements and
at the sole expense of such participant or the participant’s beneficiary.
(i) Neither the execution and delivery of this Agreement nor the consummation of the Transactions will, either alone or in connection
with any other event(s) and in any material respect: (i) result in any payment or benefit becoming due to any current or former employee,
contractor or director of the Group Companies or under any Company Benefit Plan; (ii) increase any amount of compensation or benefits
otherwise payable to any current or former employee, contractor or director of the Group Companies or under any Company Benefit Plan; (iii)
result in the acceleration of the time of payment, funding or vesting of any benefits to any current or former employee, contractor or director
of the Group Companies or under any Company Benefit Plan; or (iv) result in any limit on the right to merge, amend or terminate any
Company Benefit Plan.
(j) Neither the execution and delivery of this Agreement nor the consummation of the Transactions shall, either alone or in connection
with any other event(s), give rise to any “excess parachute payment” as defined in Section 280G(b)(1) of the Code or any excise tax owing
under Section 4999 of the Code.
(k) The Company maintains no obligations to gross-up or reimburse any individual for any tax or related interest or penalties incurred
by such individual, including under Sections 409A or 4999 of the Code or otherwise.
(l) Each Company Benefit Plan which is a “nonqualified deferred compensation plan” subject to Section 409A of the Code has been
established, operated and maintained in compliance with Section 409A of the Code in all material respects.
Section 4.13 Labor Relations.
(a) The Company has made available to the Parent a complete list of all employees of the Group Companies as of the date of this
Agreement and, as applicable, their classification as exempt or non-exempt under the Fair Labor Standards Act, employer, title and/or job
description, job location (city and state) and base compensation and any bonuses paid with respect to the 2020 fiscal year; provided that
such list may be anonymized in order to comply with Applicable Legal Requirements relating to the transfer or disclosure of personally
identifiable information, data privacy, or otherwise. As of the date of this Agreement, all employees of the Group Companies are legally
permitted to be employed by the Group Companies in the jurisdiction in which such employees are employed in their current job capacities.
(b) No Group Company is a party to or negotiating any collective bargaining agreement with respect to employees of any Group
Company.
(c) Except as would not reasonably be expected to result in material liabilities to the Group Companies, taken as a whole, since the
Company’s inception, there have been no strikes, work stoppages, slowdowns, lockouts, arbitrations, or material grievances or other labor
disputes (including unfair labor practice charges, grievances, or complaints) pending, or, to the Knowledge of the Company, threatened
against or involving any Group Company. Since the Company’s inception, (i) no labor union or other labor organization, or group of
employees of any Group Company, has made a written demand for recognition or certification with respect to any employees of any Group
Company, and there are no representation or certification proceedings presently pending or, to the Knowledge of the Company, threatened to
be brought or filed with the National Labor Relations Board or any similar labor relations tribunal or authority, (ii) to the Knowledge of the
Company, there have been no pending or threatened union organizing activities with respect to employees of any Group Company, and (iii)
there has been no actual or, to the Knowledge of the Company, threatened, material unfair labor practice charges against any Group
Company.
(d) As of the date hereof, there are no, and since the Company’s inception through the date hereof, there has been no, complaints,
charges or claims against the Company pending or, to Knowledge of the Company, threatened before any Governmental Entity based on,
arising out of, in connection with or otherwise relating to the employment, termination of employment or failure to employ by any Group
Company, of any individual, except for those complaints, charges or claims which would not, individually or in the aggregate, reasonably be
expected to be material to the Group Companies, taken as a whole.
(e) The Group Companies are, and since the Company’s inception through the date hereof, have been, in compliance in all material
respects with all Legal Requirements relating to the employment of labor, including all such Legal Requirements relating to wages (including
minimum wage and overtime), hours or work, child labor, discrimination, civil rights, withholdings and deductions, classification and payment
of employees, independent contractors, and consultants, employment equity, the federal Worker Adjustment and Retraining Notification Act
(“WARN”) and any similar state or local “mass layoff” or “plant closing” Legal Requirement, collective bargaining, occupational health and
safety, workers’ compensation, and immigration, except for instances of noncompliance which would not, individually or in the aggregate,
reasonably be expected to be material to the Group Companies, taken as a whole. There has been no “mass layoff” or “plant closing” (as
defined by WARN) with respect to the Group Companies within the six months prior to the date of this Agreement and no such events are
reasonably expected to occur prior to Closing.
(f) Except as would not reasonably be expected to result in material liabilities to the Group Companies, taken as a whole, since the
Company’s inception, (i) each of the Group Companies has withheld all amounts required by Legal Requirements or by agreement to be
withheld from the wages, salaries and other payments that have become due and payable to employees; (ii) each of the Group Companies
has paid in full to all employees and individual independent contractors all wages, salaries, commissions, bonuses and other compensation
due and payable to or on behalf of such employees and such individual independent contractors; (iii) to the Knowledge of the Company, each
individual who since the Company’s inception has provided or is providing services to any Group Company, and has been classified as (y) an
independent contractor, consultant, leased employee, or other non-employee service provider, or (z) an exempt employee, has been properly
classified as such under all Applicable Legal Requirements relating to wage and hour and Tax; and (iv) no Group Company has been liable
for any arrears of wages, compensation or related Taxes, penalties, or other sums with respect to its employees.
(g) To the Knowledge of the Company, no senior executive has provided oral or written notice, and no key employee of the Group
Companies has provided written notice, of any present intention to terminate his or her relationship with any Group Company within the first
twelve (12) months following the Closing.
(h) Since the Company’s inception, there have been no material employment discrimination or employment harassment allegations
made in writing raised, brought, or settled or, to the Knowledge of the Company, threatened, relating to any appointed officer or director of
any Group Company involving or relating to his or her services provided to the Group Companies that would reasonably be expected to
result in any material liability to the Group Companies, taken as a whole. The policies and practices of the Group Companies comply in all
material respects with all federal, state, and local Legal Requirements concerning
employment discrimination and employment harassment, except as would not, individually or in the aggregate, reasonably be expected to be
material to the Group Companies, taken as a whole.
(i) Except as would not reasonably be expected to result in material liabilities to the Group Companies, taken as a whole, since the
Company’s inception, (i) no Group Company has been party to any proceeding, order, dispute, or claim involving any joint employer or co-
employer causes of action by any individual who was employed or engaged by a third party and providing services to any Group Company;
and (ii) no Group Company has been deemed to be, or to the Knowledge of the Company alleged to be, in a joint-employment, co-
employment, or similar relationship with any third party, with respect to any of the Group Company’s employees or individual independent
contractors.
(j) The execution and delivery of this Agreement and the other Transaction Agreements and the performance of this Agreement and
the Transactions do not require the Company to seek or obtain any consent, engage in consultation with, or issue any notice to any unions or
labor organizations.
Section 4.14 Real Property; Tangible Property.
(a) The Group Companies do not own any real property.
(b) Schedule 4.14(b) of the Company Disclosure Letter lists, as of the date of this Agreement, all material real property leased by the
Group Companies (the “Leased Real Property”). The Company or one of the Company Subsidiaries has a valid, binding and enforceable
leasehold estate in, and enjoys peaceful and undisturbed possession of, all Leased Real Property and each of the leases, lease guarantees,
agreements and documents related to any Leased Real Property, including all amendments, terminations and modifications thereof, is in full
force and effect. The Company has made available to Parent true, correct and complete copies of all material Leased Real Property. None of
the Group Companies is in breach of or default under any Leased Real Property lease, and, to the Knowledge of the Company, no event has
occurred and no circumstance exists which, if not remedied, and whether with or without notice or the passage of time or both, would result in
such a breach or default, except for such breaches or defaults as would not individually or in the aggregate, reasonably be expected to be
material to the Group Companies, taken as a whole. None of the Group Companies has received written notice from, or given any written
notice to, any lessor of such Leased Real Property of, nor is there any default, event or circumstance that, with notice or lapse of time, or
both, would constitute a default by the party that is the lessee or lessor of such Leased Real Property. No party to any Leased Real Property
lease has exercised any termination rights with respect thereto.
(c) The Company or one of the Company Subsidiaries owns and has good and marketable title to, or a valid leasehold interest in or
right to use, all of its material tangible assets or personal property (together with the Intellectual Property rights and contractual rights), free
and clear of all Liens other than: (i) Permitted Liens; and (ii) the rights of lessors under any leases. The material tangible assets or personal
property of the Group Companies: (A) constitute all of the assets, rights and properties that are necessary for the operation of the businesses
of the Group Companies as they are now conducted, and taken together, are adequate and sufficient for the operation of the businesses of
the Group Companies as currently conducted; and (B) have been maintained in all material respects in accordance with generally applicable
accepted industry practice, are in good working order and condition, except for ordinary wear and tear and as would not, individually or in the
aggregate, reasonably be expected to be material to the business of the Group Companies, taken as a whole.
Section 4.15 Taxes.
(a) All material Tax Returns required to be filed by (or with respect to) the Group Companies have been timely filed (after giving effect
to any valid extensions), and all such Tax Returns are true, correct and complete in all material respects.
(b) The Group Companies have paid all material amounts of their Taxes which are due and payable. All material Taxes incurred but not
yet due and payable (i) for periods covered by the Financial Statements have been accrued and adequately disclosed on the Financial
Statements of the Group Companies in accordance with GAAP, and (ii) for periods not covered by the Financial Statements have been
accrued on the books and records of the Group Companies.
(c) The Group Companies have complied in all material respects with all Applicable Legal Requirements relating to the withholding and
remittance of all material amounts of Taxes and all material amounts of Taxes required by Applicable Legal Requirements to be withheld by
the Group Companies have been withheld and paid over to the appropriate Governmental Entity.
(d) No deficiency for any material amount of Taxes has been asserted or assessed by any Governmental Entity in writing against any
Group Company (nor to the Knowledge of the Company is there any), which deficiency has not been paid, resolved, or being contested in
good faith in appropriate Legal Proceedings and for which sufficient reserves have been established on the Financial Statements in
accordance with GAAP. No material audit or other proceeding by any Governmental Entity is currently pending or threatened in writing
against any Group Company with respect to any Taxes due from such entities (and, to the Knowledge of the Company, no such audit is
pending or contemplated).
(e) There are no liens for material amounts of Taxes (other than Permitted Liens) upon any of the assets of the Group Companies.
(f) There are no Tax indemnification agreements or Tax sharing agreements under which any Group Company could be liable after the
Closing Date for the Tax liability of any Person other than one or more of the Group Companies, except for customary agreements or
arrangements with customers, vendors, lessors, lenders and the like or other similar agreements, in each case, that do not relate primarily to
Taxes.
(g) None of the Group Companies has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code in the past two years.
(h) None of the Group Companies has entered into a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-
4(b).
(i) No Group Company: (i) has any liability for the Taxes of another Person (other than another Group Company) pursuant to Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Tax Legal Requirement) or as a transferee or a successor; or
(ii) has ever been a member of an affiliated, consolidated, combined or unitary group filing for U.S. federal, state or local income Tax
purposes, other than a group the common parent of which was and is the Company (or another Group Company).
(j) No Group Company has consented to waive or extend the time in which any material Tax may be assessed or collected by any
Governmental Entity (other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business), which
extension is still in effect, and no written request for any such waiver or extension is currently pending.
(k) No Group Company has a permanent establishment in any country other than the country of its organization or has been subject to
income Tax in a jurisdiction outside the country of its organization, in each case, where it is required to file a material income Tax Return and
does not file such Tax Return.
(l) No Group Company will be required to include any material item of income in, or exclude any material item or deduction from,
taxable income for any taxable period beginning after the Closing Date or, in the case of any taxable period beginning on or before and
ending after the Closing Date, the portion of such period beginning after the Closing Date, as a result of: (i) an installment sale or open
transaction disposition that occurred on or prior to the Closing; (ii) any change in method of accounting on or prior to the Closing, including by
reason of the application of Section 481 of the Code (or any analogous provision of state, local or foreign Tax Legal Requirements); (iii) other
than in the ordinary course of business a prepaid amount received or deferred revenue recognized on or prior to the Closing; (iv) any
intercompany transaction or excess loss account described in the Treasury Regulations under Section 1502 (or any corresponding or similar
provision of state or local Tax Legal Requirements) that occurred or existed prior to the Closing; (v) any closing agreement pursuant to
Section 7121 of the Code or any similar provision of state, local or foreign Tax Legal Requirements entered into prior to the Closing; or (vi) an
inclusion under Section 965 of the Code.
(m) The Company is not, and has not been at any time during the five (5) year period ending on the Closing Date, a “United States real
property holding corporation” within the meaning of Section 897(c)(2) of the Code.
(n) No claim has been made in writing (nor to the Knowledge of the Company is any such claim pending or contemplated) by any
Governmental Entity in a jurisdiction in which any Group Company does not file Tax Returns that is or may be subject to taxation by, or
required to file Tax Returns in, that jurisdiction.
(o) As of the date of this Agreement, the Company is not aware of any fact or circumstances that could reasonably be expected to
prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.16 Environmental Matters. Each of the Group Companies is in compliance with all Environmental Laws, except for any such
instance of non-compliance that would not reasonably be expected to be material to the Group Companies taken as a whole. The Group
Companies have obtained, hold, are, and since the Company’s inception have been, in material compliance with all permits required under
applicable Environmental Laws to permit the Group Companies to operate their assets in a manner in which they are now operated and
maintained and to conduct the business of the Group Companies as currently conducted, except where the absence of, or failure to be in
material compliance with, any such permit would not reasonably be expected to be material to the Group Companies taken as a whole.
Except as set forth on Schedule 4.16 of the Company Disclosure Letter, there are no written claims or notices of violation pending or, to the
Knowledge of the Company, threatened in writing against any of the Group Companies alleging violations of or liability under any
Environmental Law, except for any such claim or notice that would not reasonably be expected to be material to the Group Companies.
Neither the Group Companies nor, to the Knowledge of the Company, any other Person has disposed of or released any Hazardous Material
at, on or under the any facility currently or formerly owned or operated by any of the Group Companies or any third-party site, in each case in
a manner that would be reasonably likely to give rise to a material liability of the Group Companies for investigation costs, cleanup costs,
response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees under any
Environmental Laws. None of the Group Companies has agreed to indemnify any Person or assumed by Contract the liability of any third
party arising under Environmental Law. The Group Companies have made available to Parent copies of all material written environmental
reports, audits, assessments, liability analyses, memoranda and studies in the possession of, or conducted by, the Group Companies with
respect to compliance or liabilities under Environmental Law.
Section 4.17 Brokers; Third Party Expenses. Except as reflected on Schedule 4.17, no broker, finder, investment banker or other
Person is entitled to, nor will be entitled to, either directly or indirectly, any brokerage fee, finders’ fee or other similar commission, for which
Parent or any of the Group Companies would be liable in connection with the transactions contemplated by this Agreement or the
Transactions based upon arrangements made by any of the Group Companies or any of their Affiliates.
Section 4.18 Intellectual Property.
(a) Schedule 4.18(a) of the Company Disclosure Letter sets forth a true, correct and complete list, as of the date of this Agreement, of
each registered Patent and Patent application, registered Trademark and application for Trademark registration, registered Copyright,
internet domain name, and material unregistered Trademark which any of the Group Companies has (or purports to have) an ownership
interest or an exclusive license or similar exclusive right in any field or territory, whether in the United States or internationally (in each case
setting forth the applicable jurisdiction, title, application and registration or serial number and date, and record owner and, if different, the
legal owner and beneficial owner).
(b) The Company or one of the Company Subsidiaries owns, or has the right to use pursuant to a valid license, sublicense, or other
written agreement all Intellectual Property material to the conduct and operation of the business of the Group Companies, as presently
conducted and as proposed to be conducted immediately following the Closing. The Company or one of its Subsidiaries is the sole and
exclusive owner of all right, title and interest in and to all Owned Intellectual Property free and clear of all Liens (other than Permitted Liens).
(c) Except in relation to the disputes disclosed on Schedule 4.18(c)(i) of the Company Disclosure Letter, the conduct and operation of
the business of the Group Companies as presently conducted and as proposed to be conducted immediately following the Closing (including
the creation, licensing, marketing, importation, offering for sale, sale, or use of the products and services of the business of the Group
Companies), and the Owned Intellectual Property has not infringed, misappropriated (or constituted or resulted from a misappropriation of) or
otherwise violated, and are not infringing, misappropriating (or constitute or result from the misappropriation of) or otherwise violating any
Intellectual Property of any Person. Except in relation to the disputes disclosed on Schedule 4.18(c)(i) of the Company Disclosure Letter,
none of the Group Companies has received from any Person since the Company’s inception any written (or to the Knowledge of the
Company, oral) notice, charge, complaint, claim or other assertion (i) of any infringement, misappropriation or other violation of any
Intellectual Property of any Person or (ii) contesting the use, ownership, validity or enforceability of any of the Owned Intellectual Property.
Except in relation to the disputes disclosed on Schedule 4.18(c)(i) of the Company Disclosure Letter, to the Knowledge of the Company, no
other Person has infringed, misappropriated or violated, or is infringing, misappropriating or violating, any Intellectual Property of any of the
Group Companies, and no such claims have been made in writing against any Person by any of the Group Companies since the Company’s
inception. Except in relation to the disputes disclosed on Schedule 4.18(c)(i) of the Company Disclosure Letter, none of the Owned
Intellectual Property is subject to any pending or outstanding Order, settlement, consent order or other disposition of dispute that adversely
restricts the use, transfer or registration of, or adversely affects the validity or enforceability of, any Owned Intellectual Property.
(d) To the Knowledge of the Company, no past or present director, officer or employee of any of the Group Companies owns (or has
any claim, or any right (whether or not currently exercisable) to any ownership interest, in or to) any material Owned Intellectual Property.
Each of the present employees, consultants and independent contractors of the Group Companies who are engaged in creating or
developing for or on behalf of such Group Company any material Owned Intellectual Property in the course of such Person’s employment or
engagement has executed and delivered a written agreement, pursuant to which such Person has: (i) agreed to hold all confidential
information of such Group Company in confidence both during and after such Person’s employment or retention, as applicable; and (ii)
presently assigned to such Group Company all of such Person’s rights, title and interest in and to all Owned Intellectual Property created or
developed for such Group Company in the course of such Person’s employment or retention thereby. To the Knowledge of the Company,
there is no material uncured breach by any such Person with respect to material Owned Intellectual Property under any such agreement.
(e) Each of the Group Companies, as applicable, has taken commercially reasonable steps to maintain the secrecy, value and
confidentiality of all Trade Secrets constituting Owned Intellectual Property and that are material to the business of the Group Companies,
and all Trade Secrets of any Person to whom any Group Company has a contractual confidentiality obligation with respect to such Trade
Secrets. No Trade Secret that is material to the business of the Group Companies has been authorized to be disclosed, or, to the Knowledge
of the Company, has been disclosed to any other Person, other than as subject to a written agreement restricting the disclosure and use of
such Trade Secret. No source code constituting Owned Intellectual Property has been delivered, licensed or made available by any Group
Company to, or accessed by, any escrow agent or other Person, other than employees or contractors of such Group Company subject to
written agreements restricting the disclosure and use of such source code.
(f) No open source software is or has been included, incorporated or embedded in, linked to, combined, made available or distributed
with, or used in the development, maintenance, operation, delivery or provision of any computer software that is part of the services or
products currently offered by, utilized by or under development by, the Group Companies, in each case, in a manner that requires or
obligates any Group Company to: (i) disclose, contribute, distribute, license or otherwise make available to any Person (including the open
source community) any source code constituting Owned Intellectual Property; (ii) license any computer software constituting Owned
Intellectual Property for making modifications or derivative works; (iii) disclose, contribute, distribute, license or otherwise make available to
any Person any computer software constituting Owned Intellectual Property for no or nominal charge; or (iv) grant a license to, or refrain from
asserting or enforcing any of, its Patents. Each Group Company is in compliance with the terms and conditions of all relevant licenses for
open source software used in connection with services or products currently offered by, otherwise utilized by or under development by the
Group Companies.
(g) No Governmental Entity has any: (i) ownership interest or exclusive license in or to any material Owned Intellectual Property; (ii)
“unlimited rights” (as defined in 48 C.F.R. § 52.227-14 and in 48 C.F.R. § 252.227-7013(a)) in or to any of the software constituting Owned
Intellectual Property; or (iii) “march in rights” (pursuant to 35 U.S.C. § 203) in or to any Patents constituting material Owned Intellectual
Property. No funding, facilities or personnel of any Governmental Entity were used, directly or indirectly, to develop or create, in whole or in
part, any Owned Intellectual Property.
(h) The Company or one of the Company Subsidiaries owns or has a valid right to access and use pursuant to a written agreement all
Company IT Systems. The Company IT Systems: (i) are adequate in all material respects for the operation and conduct of the business of
the Group Companies as currently conducted; and (ii) do not contain any viruses, worms, trojan horses, bugs, faults or other devices, errors,
contaminants or effects that (A) materially disrupt or adversely affect the functionality of the Company IT Systems, except as disclosed in
their documentation or (B) enable or assist any Person to access without authorization any Company IT Systems. Since the Company’s
inception, there has been no unauthorized access to, breach or violation of, or security incidents impacting the integrity and availability of any
Company IT Systems. Since the Company’s inception, there have been no failures, breakdowns, continued substandard performance, data
loss, material outages, material unscheduled downtime or other adverse events affecting any such Company IT Systems that have caused or
could reasonably be expected to result in the substantial disruption of or interruption in or to the use of such Company IT Systems or the
conduct and operation of the business of the Group Companies.
(i) Neither the execution and delivery of this Agreement nor the consummation of the Transactions (either alone or in combination with
any other event) will result in the: (i) loss or impairment of, or any Lien on, any Owned Intellectual Property or material Licensed Intellectual
Property; (ii) release, disclosure or delivery of any source code constituting Owned Intellectual Property to any Person; (iii) grant, assignment
or transfer to any other Person of any license or other right or interest under, to or in any Owned Intellectual Property; or (iv) payment of any
additional consideration to, or the reduction of any payments from, any Person with respect to any Owned Intellectual Property or material
Licensed Intellectual Property.
Section 4.19 Privacy & Cybersecurity; HIPAA Compliance.
(a) The Group Companies and, to the Knowledge of the Company, any Person acting for or on the Group Companies’ behalf has at all
times since the Company’s inception (in the case of any such Person, during the time such Person was acting for or on behalf of any of the
Group Companies) materially complied, as applicable to the Group Companies, with: (i) all applicable Privacy Laws; (ii) all of the Group
Companies’ policies and notices regarding Personal Information (“Group Companies’ Privacy Notices”); and (iii) all of the Group Companies’
obligations regarding Personal Information under any Company Material Contract. Since the Company’s inception, none of the Group
Companies has received any written notice of any claims (including written notice from third parties acting on its or their behalf), of or been
charged with, the violation of, any Privacy Laws. None of the Group Companies’ Privacy Notices have contained any material omissions or
been misleading or deceptive.
(b) Except as reflected on Schedule 4.19(b), each of the Group Companies has since the Company’s inception used reasonable efforts
to: (i) implement and maintain in all material respects reasonable safeguards to protect Personal Information and other confidential data in its
possession or under its control against loss, theft, misuse or unauthorized access, use, destruction, modification or disclosure; and (ii) require
all third-party service providers, outsourcers, processors or other third parties who process, store or otherwise handle Personal Information
for or on behalf of such Group Company that obligate such Persons to comply with applicable Privacy Laws in all material respects and to
take reasonable steps to protect and secure Personal Information from loss, theft, misuse or unauthorized access, use, destruction
modification or disclosure. Any third party who has provided Personal Information to such Group Company since the Company’s inception
has done so in compliance with applicable Privacy Laws, including providing any notice and obtaining any consent required under such
Privacy Laws.
(c) Since the Company’s inception, there have been no breaches, security incidents, misuse of or unauthorized access to or disclosure
of any Personal Information and other confidential data in the possession or control of any of the Group Companies or collected, used or
processed by or on behalf of the Group Companies and none of the Group Companies have provided or been legally or contractually
required to provide any notices to any Person in connection with unauthorized access to or disclosure of Personal Information since the
Company’s inception. Since the Company’s inception, the Group Companies have implemented reasonable disaster recovery and business
continuity plans, and taken actions consistent with such plans, to the extent required, to safeguard the data and Personal Information in its
possession or control. The Company has conducted commercially reasonable data security testing or audits at reasonable and appropriate
intervals and has resolved or remediated any material data security issues or vulnerabilities identified. None of the Group Companies nor any
third party acting at the direction or authorization of such Group Companies has paid: (i) any perpetrator of any data breach incident or cyber-
attack; or (ii) any third party with actual or alleged information about a data breach incident or cyber-attack, pursuant to a request for payment
from or on behalf of such perpetrator or other third party.
(d) The Group Companies have been in compliance with all applicable Contracts that involve the use, disclosure, or access to
individually identifiable health information, including, compliance with the applicable provisions of HIPAA.
Section 4.20 Agreements, Contracts and Commitments.
(a) Schedule 4.20 of the Company Disclosure Letter sets forth a true, correct and complete list of each Company Material Contract (as
defined below) that is in effect as of the date of this Agreement. For purposes of this Agreement, “Company Material Contract” of the Group
Companies shall mean each of the following Contracts to which any of the Group Companies is a party:
(i) Each Contract continuing over a period of more than twelve (12) months from the date thereof and not terminable by the
Company upon sixty (60) days’ or less notice without liability or penalty (other than (A) agreements for the provision of Company’s
products or services and (B) purchase orders with suppliers or customers, in each case (A) and (B), entered into in the ordinary course
of business) that the Company reasonably anticipates will involve annual payments or consideration furnished by or to any of the
Group Companies of more than $2,500,000;
(ii) Each note, debenture, other evidence of indebtedness, guarantee, loan, credit or financing agreement or instrument or other
contract for money borrowed by any of the Group Companies from a third party, in each case, having an outstanding principal amount
in excess of $2,500,000, but excluding guarantees of performance under Government Contracts entered into in the ordinary course of
business;
(iii) Each Contract for the acquisition of any Person or any business division thereof or the disposition of any material assets of
any of the Group Companies (other than in the ordinary course of business), in each case, whether by merger, purchase or sale of
stock or assets or otherwise (other than Contracts for the purchase or sale of inventory or supplies entered into in the ordinary course
of business) occurring in the last five years and/or relating to the pending or future acquisitions or dispositions;
(iv) Each obligation to make payments, contingent or otherwise, arising out of the prior acquisition of the business, assets or
stock of other Persons;
(v) Each collective bargaining agreement with any labor union;
(vi) Each employment or consulting (with respect to an individual independent contractor) Contract providing for annual base
salary or annual commitment consulting fee payments in excess of $350,000, excluding any such employment, consulting, or
management Contract that either: (A) is terminable by the Company or the applicable Company Subsidiary at will; or (B) provides for
severance, notice and/or garden leave obligations of 90 days or less or such longer period as is required by Applicable Legal
Requirements;
(vii) Each lease, rental agreement, installment and conditional sale agreement, or other Contract that, in each case, (A) provides
for the ownership of, leasing of, title to, use of, or any leasehold or other interest in any personal property; and (B) involves annual
payments in excess of $2,500,000;
(viii) Each joint venture Contract, partnership agreement or limited liability company agreement with a third party (in each case,
other than with respect to wholly owned Company Subsidiaries);
(ix) Each Contract, other than teaming agreements entered into in connection with the pursuit of a specific Government Contract
or subcontract thereto or customary non-disclosure agreements, that purports to limit or contains covenants expressly limiting in any
material respect the freedom of any of the Group Companies to: (A) compete with any Person in a product line or line of business, (B)
otherwise develop, market, sell, distribute or otherwise exploit any service or products; or (C) operate in any geographic area;
(x) Each Contract (other than those made in the ordinary course of business): (A) providing for the grant of any preferential rights
to purchase or lease any material asset (other than any services or products) of the Group Companies; or (B) providing for any right
(exclusive or non-exclusive) to sell or distribute any material product or service of any of the Group Companies;
(xi) Each Contract pursuant to which any of the Group Companies licenses material Intellectual Property from a third party, other
than click-wrap, shrink-wrap and off-the-shelf software licenses, and any other software licenses that are available on standard terms
to the public generally with license, maintenance, support and other fees less than $50,000 per year;
(xii) Each Contract containing an assignment or license to any third party of any material Owned Intellectual Property, or any
covenant not to assert or enforce, any material Owned Intellectual Property against any third party, in each case, except non-exclusive
licenses or covenants not to assert or enforce any such Intellectual Property granted by any Group Company to any third parties
(including customers, suppliers, consultants, and independent contractors) in the ordinary course of business;
(xiii) Each Contract containing a license to any Group Company under any Licensed Intellectual Property;
(xiv) Each Contract pursuant to which any material Owned Intellectual Property is or was developed by any third party for any
Group Company (in each case excluding (i) non-exclusive licenses to “off the shelf” third party computer software that is licensed on
generally available, standard commercial terms and (ii) licenses for open-source software);
(xv) Each Contract that contains a most-favored nations clause, non-competition covenant, non-solicitation of employees,
customers or clients covenant or any other covenant that restricts, precludes or limits any of the Group Companies (or purports to bind
any Affiliate thereof) from operating or freely engaging in any line of business or in any geographic location or with any Person or
during any period of time, or from developing, marketing, selling, distributing or otherwise exploiting any service or products;
(xvi) All Contracts that grant to any counterparty to such Contract a right of first refusal, first offer or first negotiation, or similar
right with respect to any material assets, rights, or properties of the Group Companies;
(xvii) All Contracts that contain indemnification provisions, an earn-out or the payment of a deferred purchase price other than in
the ordinary course of business;
(xviii) All Contracts that are settlement, conciliation, or similar agreements, other than releases entered into with former
employees or independent contractors in the ordinary course of business;
(xix) All Contracts involving transactions with an Affiliate of the Company;
(xx) each Leased Real Property lease; and
(xxi) Each obligation to register any Company Common Stock, Company Preferred Stock or other securities of the Company
with any Governmental Entity.
(b) All Company Material Contracts are: (i) in full force and effect, subject to the Remedies Exception; and (ii) represent the valid and
binding obligations of the Company or one of the Company Subsidiaries party thereto and, to the Knowledge of the Company, represent the
valid and binding obligations of the other parties thereto. True, correct and complete copies of all Company Material Contracts have been
made available to Parent. None of the Group Companies nor, to the Knowledge of the Company, any other party thereto, is in breach of or
default under, and no event has occurred which with notice or lapse of time or both would become a breach of or default under, any of the
Company Material Contracts, and no party to any Company Material Contract has given any written or, to the Knowledge of the Company,
oral, claim or notice of any such breach, default or event, which individually or in the aggregate, would be reasonably likely to be material to
the Group Companies, taken as a whole.
Section 4.21 Insurance. Schedule 4.21 of the Company Disclosure Letter contains a list of all material policies of property, fire and
casualty, product liability, workers’ compensation, and other forms of insurance held by, or for the benefit of, the Group Companies as of the
date of this Agreement (collectively, the “Insurance Policies”), which policies are in full force and effect as of the date of this Agreement. True
and complete copies of the Insurance Policies (or, to the extent such policies are not available, policy binders) have been made available to
Parent or its representatives. As of the date of this Agreement, none of the Group Companies has received any written notice from any
insurer under any of the Insurance Policies, canceling, terminating or materially adversely amending any such policy or denying renewal of
coverage thereunder and all premiums on such insurance policies due and payable as of the date of this Agreement have been paid. As of
the date of this Agreement, there is no pending material claim by any Group Company against any insurance carrier for which coverage has
been denied or disputed by the applicable insurance carrier (other than a customary reservation of rights notice).
Section 4.22 Affiliate Matters. Except: (a) the Company Benefit Plans; (b) Contracts relating to labor and employment matters set forth
on Schedule 4.13 of the Company Disclosure Letter; (c) for Contracts pertaining to securities of the Company listed in the Capitalization
Ledger; and (d) Contracts between or among the Group Companies, none of the Group Companies is party to any Contract with any: (i)
present or former officer, director, employee or Company Stockholder or a member of his or her immediate family of any of the Group
Companies; or (ii) Affiliate of the Company (other than commercial contracts on arms-length terms). To the Knowledge of the Company, no
present or former officer, director, employee, Company Stockholder or holder of derivative securities of the Company (each, an “Insider”) or
any member of an Insider’s immediate family is, directly or indirectly, interested in any Contract with any of the Group Companies (other than
such Contracts as relate to any such Person’s ownership of Company Common Stock, Company Preferred Stock or other securities of the
Company or such Person’s employment or consulting arrangements with the Group Companies or commercial contracts on arms-length
terms).
Section 4.23 Certain Provided Information. The information relating to the Group Companies supplied by the Company for inclusion in
the Registration Statement or the Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which
they were made, not misleading at (a) the time that such information is filed with the SEC (provided, if such information is revised by any
subsequently filed amendment to the Registration Statement prior to the time that the Registration Statement is declared effective by the
SEC, this clause (a) shall solely refer to the time of such subsequent revision); (b) at the time the Registration Statement is declared effective
by the SEC; (c) the time that the Proxy Statement/Prospectus included in the Registration Statement is first mailed to the holders of Parent
Class A Stock; or (d) at the time of the Special Meeting. Notwithstanding the foregoing, the Company makes no representation, warranty or
covenant with respect to statements made or incorporated by reference therein based on information supplied by Parent or Merger Sub for
inclusion or incorporation by reference in the Registration Statement, the Proxy Statement/Prospectus or any Parent SEC Reports or
Additional Parent SEC Reports.
Section 4.24 Absence of Certain Business Practices.
(a) Since the Company’s Inception: (i) the Group Companies and their respective directors and officers (in their capacities as such)
and, to the Knowledge of the Company, their respective employees or agents (in their capacities as such) have been in material compliance
with all applicable Specified Business
Conduct Laws; and (ii) none of the Group Companies has: (A) received written notice, inquiry or internal or external allegation of or made a
voluntary, mandatory or directed disclosure to any Governmental Entity relating to any actual or potential violation of any Specified Business
Conduct Law; or (B) been a party to or the subject of any pending or, to the Knowledge of the Company, threatened in writing Legal
Proceeding or, to the Knowledge of the Company, investigation by or before any Governmental Entity related to any actual or potential
violation of any Specified Business Conduct Law.
(b) None of the Group Companies, nor any of their respective directors or officers, nor to the Knowledge of the Company, any of their
respective employees or agents is the subject or target of any sanctions or the target of restrictive export controls administered by the U.S.
government, the United Nations Security Council, Her Majesty’s Treasury of the United Kingdom, or the European Union.
(c) None of the Group Companies, their respective directors or officers, or, to the Knowledge of the Company, their respective
employees or agents is a person who is, or is owned or controlled by a person who is, the subject or target of any economic or financial
sanctions or is located, organized or resident in a country or territory that is the subject of sanctions administered or enforced by OFAC, the
U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions
authority, including currently, Crimea, Cuba, Iran, North Korea, and Syria. None of the Group Companies’ products are identified or described
on the Commerce Control List of the EAR or otherwise controlled for export.
(d) None of the Group Companies, their respective directors or officers (in their capacities as such), or, to the Knowledge of the
Company, their respective employees or agents (in their capacities as such) is subject to any pending Legal Proceeding by any
Governmental Entity, and, to the Knowledge of the Company, no such Legal Proceeding is threatened in writing, alleging that any of the
Group Companies or such Person has offered, made or received on behalf of any of the Group Companies any illegal payment of any kind,
directly or indirectly, including payments, gifts or gratuities, to any Person, including any United States federal, state, local or foreign
government officeholder, official, employee or agent or any candidate therefor.
Section 4.25 Government Grants and Incentives. Schedule 4.25 of the Company Disclosure Letter provides a complete list of all
pending and outstanding grants, incentives, benefits, qualifications and subsidies from any Governmental Entity granted to the Company or
any of its Subsidiaries (collectively, “Government Grants”). The Group Companies do not have any obligation whatsoever with respect to
royalties or other payments relating to, arising out of or in connection with the Government Grants identified or required to be identified in
Schedule 4.25 of the Company Disclosure Letter. The Group Companies are in material compliance with all of the terms, conditions and
requirements of their respective Government Grants and have duly fulfilled all the undertakings relating thereto. None of the Group
Companies or their agents, contractors, vendors, or licensors has developed any material Owned Intellectual Property through the
application of any financing made available by any Government Grants, and no material Owned Intellectual Property is subject to any
assignment, grant-back, license or other right of any Governmental Entity as a result of any Government Grants.
Section 4.26 OIG. To the Group Companies’ Knowledge, none of the employees of the Group Companies are included on the List of
Excluded Individuals/Entities maintained by the Office of Inspector General of the United States Department of Health and Human Services.
Section 4.27 Suppliers and Customers.
(a) The Group Companies have no customers.
(b) Schedule 4.27(b) of the Company Disclosure Letter lists the 20 largest suppliers (by committed amounts paid/payable to such
suppliers) of the Group Companies, during the 12-month period ended June 30, 2021 (each, a “Top Supplier”). Since the commencement of
such 12-month period until the date of this Agreement, (i) no such Top Supplier has terminated, or otherwise materially and adversely
modified, its relationship with the Group Companies and (ii) none of the Group Companies has received written notice from any such Top
Supplier notifying any of the Group Companies that such Top Supplier intends to terminate, or otherwise materially and adversely modify, its
relationship with the Group Companies.
Section 4.28 Disclaimer of Other Warranties. THE COMPANY HEREBY ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY
PROVIDED IN ARTICLE V, NONE OF PARENT, MERGER SUB, OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES
HAS MADE, IS MAKING, OR SHALL BE DEEMED TO MAKE ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, AT LAW OR IN EQUITY, TO THE COMPANY, ANY OF ITS AFFILIATES OR REPRESENTATIVES OR ANY OTHER PERSON,
WITH RESPECT TO PARENT, MERGER SUB, OR ANY OF THEIR RESPECTIVE BUSINESSES, ASSETS OR PROPERTIES OF THE
FOREGOING, OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, FUTURE RESULTS, PROPOSED BUSINESSES OR FUTURE PLANS. WITHOUT LIMITING THE FOREGOING
AND NOTWITHSTANDING ANYTHING TO THE CONTRARY: (a) NONE OF PARENT, MERGER SUB, OR ANY OF THEIR RESPECTIVE
AFFILIATES OR REPRESENTATIVES SHALL BE DEEMED TO MAKE TO THE COMPANY, COMPANY STOCKHOLDERS, OR THEIR
RESPECTIVE AFFILIATES OR REPRESENTATIVES ANY REPRESENTATION OR WARRANTY OTHER THAN AS EXPRESSLY MADE BY
PARENT AND MERGER SUB TO THE COMPANY IN ARTICLE V; AND (b) NONE OF PARENT, MERGER SUB, OR ANY OF THEIR
RESPECTIVE AFFILIATES OR REPRESENTATIVES, HAS MADE, IS MAKING, OR SHALL BE DEEMED TO MAKE TO THE COMPANY,
COMPANY STOCKHOLDERS, OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES OR ANY OTHER PERSON ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO: (i) THE INFORMATION DISTRIBUTED OR MADE
AVAILABLE TO THEM BY OR ON BEHALF OF PARENT OR MERGER SUB IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS; (ii) ANY MANAGEMENT PRESENTATION, CONFIDENTIAL INFORMATION MEMORANDUM OR SIMILAR DOCUMENT;
OR (iii) ANY FINANCIAL PROJECTION, FORECAST, ESTIMATE, BUDGET OR SIMILAR ITEM RELATING TO PARENT, MERGER SUB,
OR ANY OF THEIR BUSINESS, ASSETS, LIABILITIES, PROPERTIES, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROJECTED OPERATIONS OF THE FOREGOING. THE COMPANY HEREBY ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY
PROMISE, REPRESENTATION OR WARRANTY THAT IS NOT EXPRESSLY SET FORTH IN ARTICLE V OF THIS AGREEMENT. THE
COMPANY ACKNOWLEDGES THAT IT HAS CONDUCTED, TO ITS SATISFACTION, AN INDEPENDENT INVESTIGATION AND
VERIFICATION OF PARENT, MERGER SUB, AND THE BUSINESS, ASSETS, LIABILITIES, PROPERTIES, FINANCIAL CONDITION,
RESULTS OF OPERATIONS AND PROJECTED OPERATIONS OF THE FOREGOING AND, IN MAKING ITS DETERMINATION THE
COMPANY HAS RELIED ON THE RESULTS OF ITS OWN INDEPENDENT INVESTIGATION AND VERIFICATION, IN ADDITION TO THE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY EXPRESSLY AND SPECIFICALLY SET FORTH IN ARTICLE V OF THIS
AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 4.28, CLAIMS AGAINST PARENT, MERGER
SUB, OR ANY OTHER PERSON SHALL NOT BE LIMITED IN ANY RESPECT IN THE EVENT OF INTENTIONAL FRAUD IN THE MAKING
OF THE REPRESENTATIONS AND WARRANTIES IN ARTICLE V BY SUCH PERSON.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except: (a) as set forth in the letter dated as of the date of this Agreement and delivered by Parent and Merger Sub to the Company on
or prior to the date of this Agreement (the “Parent Disclosure Letter”); and (b) as disclosed in the Parent SEC Reports filed with the SEC prior
to the date of this Agreement (to the extent the qualifying nature of such disclosure is readily apparent from the content of such Parent SEC
Reports) excluding disclosures referred to in “Forward-Looking Statements”, “Risk Factors” and any other disclosures therein to the extent
they are of a predictive or cautionary nature or related to forward-looking statements, Parent and Merger Sub represent and warrant to the
Company as of the date hereof and as of the Closing Date as follows:
Section 5.1 Organization and Qualification.
(a) Each of Parent and Merger Sub is duly incorporated, validly existing and in good standing under the laws of the State of Delaware,
and as of immediately prior to the Closing, will be a company duly organized, validly existing and in good standing under the laws of the State
of Delaware.
(b) Each of Parent and Merger Sub has the requisite corporate or limited liability power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted, except as would not be material to Parent and Merger Sub,
taken as a whole.
(c) None of Parent or Merger Sub are in violation of any of the provisions of their respective Charter Documents.
(d) Each of Parent and Merger Sub is duly qualified or licensed to do business as a foreign corporation and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or
licensing necessary. Each jurisdiction in which Parent and Merger Sub are so qualified or licensed is listed on Schedule 5.1(d) of the Parent
Disclosure Letter.
Section 5.2 Parent Subsidiaries. Parent has no direct or indirect Subsidiaries or participations in joint ventures or other entities, and
does not own, directly or indirectly, any equity interests or other interests or investments (whether equity or debt) in any Person, whether
incorporated or unincorporated, other than Merger Sub. Merger Sub has no assets or properties of any kind, does not now conduct and has
never conducted any business, and has and will have at the Closing no obligations or liabilities of any nature whatsoever, except for such
obligations as are imposed under this Agreement. Merger Sub is an entity that has been formed solely for the purpose of engaging in the
Transactions.
Section 5.3 Capitalization.
(a) As of the date of this Agreement: (i) 380,000,000 Class A common shares of Parent, par value $0.0001 per share, which shares of
Class A Common Stock shall be reclassified immediately prior to the Closing into common stock, par value $0.0001 per share of Parent
(such shares, prior to and following such reclassification, referred to herein as “Parent Class A Stock”), are authorized and 55,200,000
shares of Parent Class A Stock are issued and outstanding; (ii) 20,000,000 Class B common shares of Parent, par value $0.0001 per share
(“Parent Class B Stock” and, together with the Parent Class A Stock, the “Parent Shares”), are authorized and 13,800,000 shares of Parent
Class B Stock are issued and outstanding; (iii) upon the closing of the transactions contemplated by the Equity Financing Agreements,
Parent has committed to issue up to 120,000,000 shares of Parent Class A Stock to the Equity Financing Investors; (iv) 8,693,333 warrants
to purchase one share of Parent Class A Stock (the “Private Placement Warrants”) are outstanding; and (v) 11,040,000 warrants to purchase
one share of Parent Class A Stock (the “Public Warrants”, collectively with the Private Placement Warrants, the “Parent Warrants”) are
outstanding. All outstanding Parent Class A Stock, Parent Class B Stock, Private Placement Warrants and Public Warrants have been duly
authorized, validly issued, fully paid and are non-assessable and are not subject to preemptive rights.
(b) The authorized capital stock of Merger Sub consists of 100 shares of common stock, par value $0.0001 per share (the “Merger Sub
Common Stock”). As of the date hereof, 100 shares of Merger Sub Common Stock are issued and outstanding. All outstanding shares of
Merger Sub Common Stock have been duly authorized, validly issued, fully paid and are non-assessable and are not subject to preemptive
rights, and are held by Parent.
(c) Except for the Parent Warrants and the Equity Financing Agreements, there are no outstanding options, warrants, rights,
convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, restricted stock
units, commitments or Contracts of any kind to which Parent or Merger Sub is a party or by which any of them is bound obligating Parent or
Merger Sub to issue, deliver or sell, or cause to be issued, delivered or sold, additional Parent Shares, Merger Sub Common Stock or any
other shares of capital stock or membership interests other interest or participation in, or any security convertible or exercisable for or
exchangeable into Parent Shares, Merger Sub Common Stock or any other shares of capital stock or membership interests or other interest
or participation in Parent or Merger Sub.
(d) Each Parent Share, share of Merger Sub Common Stock and Parent Warrant: (i) has been issued in compliance in all material
respects with: (A) Applicable Legal Requirements; and (B) the Charter Documents of Parent or Merger Sub, as applicable; and (ii) was not
issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription right or any similar right under any Applicable Legal Requirements, the
Charter Documents of Parent or Merger Sub, as applicable or any Contract to which any of Parent or Merger Sub is a party or otherwise
bound by.
(e) All outstanding shares of capital stock of the Subsidiaries of Parent are owned by Parent, or a direct or indirect wholly-owned
Subsidiary of Parent, free and clear of all Liens (other than Permitted Liens).
(f) Subject to approval of the Parent Stockholder Matters, the shares of Parent Class A Stock to be issued by Parent in connection with
the Transactions, upon issuance in accordance with the terms of this Agreement will be duly authorized, validly issued, fully paid and
nonassessable, and will not be subject to any preemptive rights of any other stockholder of Parent and will be capable of effectively vesting in
the Company Stockholders title to all such securities, free and clear of all Liens (other than Liens arising pursuant to applicable securities
Legal Requirements).
(g) Each holder of any of Parent Shares initially issued to the Sponsor in connection with Parent’s initial public offering: (i) is obligated
to vote all of such Parent Shares in favor of approving the Transactions; and (ii) is not entitled to elect to redeem any of such Parent pursuant
to the Parent Organizational Documents.
(h) Except as set forth in the Parent Organizational Documents and in connection with the Transactions, there are no registration
rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreements or understandings to which Parent is a party or
by which Parent is bound with respect to any ownership interests of Parent.
(i) The holders of the Parent Class B Stock have irrevocably waived any adjustment to the Initial Conversion Ratio (as defined in the
Parent Charter).
Section 5.4 Authority Relative to this Agreement.
(a) Each of Parent and Merger Sub has the requisite power and authority to: (a) execute, deliver and perform this Agreement and the
other Transaction Agreements to which it is a party, and each ancillary document that it has executed or delivered or is to execute or deliver
pursuant to this Agreement; and (b) carry out its obligations hereunder and thereunder and, to consummate the Transactions (including the
Merger). The execution and delivery by Parent and Merger Sub of this Agreement and the other Transaction Agreements to which each of
them is a party, and the consummation by Parent and Merger Sub of the Transactions (including the Merger) have been duly and validly
authorized by all necessary corporate or limited liability company action on the part of each of Parent and Merger Sub, and no other
proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or the other Transaction Agreements to which
each of them is a party or to consummate the transactions contemplated thereby, other than approval of the Parent Stockholder Matters. This
Agreement and the other Transaction Agreements to which each of them is a party have been, or in the case of any Transaction Agreements
to be executed at or in connection with the Closing, will be duly and validly executed and delivered by Parent and Merger Sub and, assuming
the due authorization, execution and delivery thereof by the other Parties, constitute or will constitute the legal and binding obligations of
Parent and Merger Sub (as applicable), enforceable against Parent and Merger Sub (as applicable) in accordance with their terms, subject to
the Remedies Exception.
(b) The Parent Stockholder Approval is the only vote of the holders of any class or series of capital stock of Parent required to approve
and adopt this Agreement and approve the Transactions.
(c) At a meeting duly called and held, the board of directors of Parent has: (i) determined that it is in the best interests of Parent and
the stockholders of Parent, and declared it advisable, to enter into this Agreement providing for the Merger in accordance with the DGCL; (ii)
determined that the fair market value of the Company is equal to at least 80% of the amount held in the Trust Account (excluding any
deferred underwriting commissions and taxes payable on interest earned) as of the date hereof; (iii) approved this Agreement and the
Transactions, including the Merger in accordance with the DGCL, on the terms and subject to the conditions of this Agreement; and (iv)
adopted a resolution recommending the plan of merger set forth in this Agreement be adopted by the stockholders of Parent.
Section 5.5 No Conflict; Required Filings and Consents.
(a) Neither the execution, delivery nor performance by Parent and Merger Sub of this Agreement or the other Transaction Agreements
to which each of them is a party, nor (assuming approval of the Parent Stockholder Matters is obtained) the consummation of the
Transactions shall: (i) conflict with or violate their respective Charter Documents; (ii) assuming that the consents, approvals, orders,
authorizations, registrations, filings or permits referred to in Section 5.5(b) are duly and timely obtained or made, conflict with or violate any
Applicable Legal Requirements; or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or materially impair their respective rights or alter the rights or obligations of any third party under, or give to
others any rights of consent, termination, amendment, acceleration or cancellation of, or result in the creation of a Lien (other than any
Permitted Lien) on any of the properties or assets of Parent or any of its Subsidiaries pursuant to, any Parent Material Contracts, except, with
respect to clause (iii), as would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(b) The execution and delivery by each of Parent and Merger Sub of this Agreement and the other Transaction Agreements to which it
is a party, does not, and the performance of its obligations hereunder and thereunder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except: (i) for the filing of the Certificate of Merger in accordance with the
DGCL; (ii) for applicable requirements, if any, of the Securities Act, the Exchange Act, blue sky laws, and the rules and regulations
thereunder, and appropriate documents with the relevant authorities of other jurisdictions in which Parent is qualified to do business; (iii) for
the filing of any notifications required under the HSR Act and the expiration of the required waiting period thereunder; and (iv) where the
failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect, or prevent the consummation of the Merger.
Section 5.6 Compliance; Approvals. Since its incorporation or organization, as applicable, each of Parent and Merger Sub has
complied in all material respects with and has not been in violation of any Applicable Legal Requirements with respect to the conduct of its
business, or the ownership or operation of its business. Since the date of its incorporation or organization, as applicable, to the Knowledge of
Parent, no investigation or review by any Governmental Entity with respect to Parent or any of its Subsidiaries has been pending or
threatened. No written, or to the Knowledge of Parent, oral notice of non-compliance with any Applicable Legal Requirements has been
received by Parent or Merger Sub. Each of Parent and Merger Sub is in possession of all Approvals necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have
such Approvals would not, individually or in the aggregate, reasonably be expected to be material to Parent and Merger Sub, taken as a
whole.
Section 5.7 Parent SEC Reports and Financial Statements.
(a) Parent has filed all forms, reports, schedules, statements and other documents, including any exhibits thereto, required to be filed
or furnished by Parent with the SEC under the Exchange Act or the Securities Act since the initial registration of Parent Class A Stock to the
date of this Agreement, together with any amendments, restatements or supplements thereto (all of the foregoing filed prior to the date of this
Agreement, the “Parent SEC Reports”), and will have filed all such forms, reports, schedules, statements and other documents required to be
filed subsequent to the date of this Agreement through the Closing Date (the “Additional Parent SEC Reports”). All Parent SEC Reports,
Additional Parent SEC Reports, any correspondence from or to the SEC or Nasdaq (other than such correspondence in connection with the
initial public offering of Parent) and all certifications and statements required by: (i) Rule 13a-14 or 15d-14 under the Exchange Act; or (ii) 18
U.S.C. § 1350 (Section 906) of the Sarbanes-Oxley Act with respect to any of the foregoing (collectively, the “Certifications”) are available on
the SEC’s Electronic Data-Gathering, Analysis and Retrieval system (EDGAR) in full without redaction. Parent has heretofore furnished to
the Company true and correct copies of all amendments and modifications that have not been filed by Parent with the SEC to all agreements,
documents and other instruments that previously had been filed by Parent with the SEC and are currently in effect. The Parent SEC Reports
were, and the Additional Parent SEC Reports will be, prepared in accordance with the requirements of the Securities Act, the
Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the rules and regulations thereunder. The Parent SEC Reports did not,
and the Additional Parent SEC Reports will not, at the time they were or are filed, as the case may be, with the SEC contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The Certifications are each true and correct. Parent
maintains disclosure controls and procedures required by Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Each director and executive
officer of Parent has filed with the SEC on a timely basis all statements required with respect to Parent by Section 16(a) of the Exchange Act
and the rules and regulations thereunder. As used in this Section 5.7, the term “file” shall be broadly construed to include any manner in
which a document or information is furnished, supplied or otherwise made available to the SEC or Nasdaq. None of Parent (including any
employee thereof), Merger Sub or Parent’s independent auditors has identified or been made aware of (A) any significant deficiency or
material weakness in the system of internal accounting controls utilized by Parent other than the material weakness identified in connection
with the Warrant Accounting Issue disclosed in Parent’s Quarterly Report on Form 10-Q for the three months ended March 31, 2021 filed with
the SEC on May 26, 2021 (the “Parent Q1 2021 Quarterly Report”), (B) any fraud, whether or not material, that involves Parent’s
management or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by
Parent or (C) any claim or allegation regarding either (A) or (B). To resolve the Warrant Accounting Issue, the Parent Q1 2021 Quarterly
Report classified the Parent Warrants as derivative liabilities measured at fair value in the financial statements and notes contained therein.
(b) The financial statements and notes contained or incorporated by reference in the Parent SEC Reports fairly present, and the
financial statements and notes to be contained in or to be incorporated by reference in the Additional Parent SEC Reports will fairly present,
the financial condition and the results of operations, changes in stockholders’ equity and cash flows of Parent as at the respective dates of,
and for the periods referred to, in such financial statements, all in accordance with: (i) GAAP; and (ii) Regulation S-X or Regulation S-K, as
applicable, subject, in the case of interim financial statements, to normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be material) and the omission of notes to the extent permitted by Regulation S-X or Regulation S-K, as
applicable. Parent has no off-balance sheet arrangements that are not disclosed in the Parent SEC Reports. No financial statements other
than those of Parent are required by GAAP to be included in the consolidated financial statements of Parent.
Section 5.8 Absence of Certain Changes or Events. Except as set forth in Parent SEC Reports filed prior to the date of this Agreement,
and except as contemplated by this Agreement, since December 31, 2020, there has not been: (a) any Parent Material Adverse Effect; (b)
any declaration, setting aside or payment of any dividend on, or other distribution in respect of, any of Parent’s capital stock, or any
purchase, redemption or other acquisition by Parent of any of Parent’s capital stock or any other securities of Parent or any options,
warrants, calls or rights to acquire any such shares or other securities; (c) any split, combination or reclassification of any of Parent’s capital
stock; (d) any material change by Parent in its accounting methods, principles or practices, except as required by concurrent changes in
GAAP (or any interpretation thereof) or Applicable Legal Requirements (including with respect to the Warrant Accounting Issue); (e) any
change in the auditors of Parent; (f) any revaluation by Parent of any of its assets, including, without limitation, any sale of assets of Parent
other than in the ordinary course of business; or (g) any action taken or agreed upon by Parent or any of its Subsidiaries that would be
prohibited by Section 6.1 if such action were taken on or after the date hereof without the consent of the Company.
Section 5.9 Litigation. As of the date of this Agreement, there are no Legal Proceedings pending or, to the Knowledge of Parent,
threatened in writing against or otherwise relating to Parent or any of its Subsidiaries, before any Governmental Entity: (a) challenging or
seeking to enjoining, alter or materially delay the Transactions; or (b) that would, individually or in the aggregate, reasonably be expected to
be material to Parent.
Section 5.10 Business Activities; Liabilities.
(a) Since their respective incorporation, neither Parent, nor Merger Sub has conducted any business activities other than activities: (i)
in connection with its organization; or (ii) directed toward the
accomplishment of a business combination. Except as set forth in the Parent Organizational Documents, there is no Contract or Order
binding upon Parent or Merger Sub or to which any of them is a party which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of it, any acquisition of property by it or the conduct of business by it as currently
conducted or as currently contemplated to be conducted (including, in each case, following the Closing). Other than under the Transaction
Agreements or pursuant to the performance of its obligations thereunder, neither Parent nor Merger Sub has any material liabilities, debts or
obligations (absolute, accrued, contingent or otherwise).
(b) Merger Sub was formed solely for the purpose of effecting the transactions contemplated by this Agreement and has not engaged
in any business activities or conducted any operations other than in connection with the transactions contemplated hereby and has no, and
at all times prior to the Effective Time, except as expressly contemplated by this Agreement, the Transaction Agreements and the other
documents and transactions contemplated hereby and thereby, will have no, assets, liabilities or obligations of any kind or nature whatsoever
other than those incident to its formation.
(c) Except for this Agreement, the Transaction Agreements, the Transactions and the Parent Material Contracts, Parent has no
material interests, rights, obligations or liabilities with respect to, and is not party to, bound by or has its assets or property subject to, in each
case whether directly or indirectly, any Parent Material Contract (as defined below) or party to any transaction which is, or would reasonably
be interpreted as constituting, a Parent Business Combination. Except for the transactions contemplated by this Agreement, the Transaction
Agreements, or the Trust Agreement, Merger Sub does not own or have a right to acquire, directly or indirectly, any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture, business, trust or other entity.
Section 5.11 Parent Material Contracts. Schedule 5.11 of the Parent Disclosure Letter sets forth a true, correct and complete list of
each “material contract” (as such term is defined in Regulation S-K of the SEC) to which Parent or Merger Sub is party (the “Parent Material
Contracts”), other than any such Parent Material Contract that is listed as an exhibit to Parent’s Form S-1 Registration Statement, initially
filed with the SEC on February 25, 2021.
Section 5.12 Parent Listing. The issued and outstanding Parent Units are registered pursuant to Section 12(b) of the Exchange Act
and are listed for trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CMLTU.” The issued and outstanding shares of Parent
Class A Stock are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on Nasdaq under the symbol “CMLT.”
The issued and outstanding Public Warrants are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on
Nasdaq under the symbol “CMLTW.” Parent is a member in good standing with Nasdaq. There is no action or proceeding pending or, to the
Knowledge of Parent, threatened in writing against Parent by Nasdaq or the SEC with respect to any intention by such entity to deregister the
Parent Units, the shares of Parent Class A Stock or Public Warrants or terminate the listing of Parent on Nasdaq. None of Parent or any of its
Affiliates has taken any action in an attempt to terminate the registration of the Parent Units, the Parent Class A Stock or Public Warrants
under the Exchange Act.
Section 5.13 Equity Financing Amount. Parent has delivered to the Company each of the subscription agreements (the “Equity
Financing Agreements”) entered into by Parent with the applicable investors named therein (collectively, the “Equity Financing Investors”),
pursuant to which the Equity Financing Investors have committed to provide equity financing to Parent in the aggregate amount of
$1,200,000,000 (the “Equity Financing Amount”). The Equity Financing Amount, together with the amount in the Trust Account at the Closing,
are in the aggregate sufficient to enable Parent to: (a) pay all cash amounts required to be paid by Parent or its Subsidiaries under or in
connection with this Agreement; and (b) pay any and all fees and expenses of or payable by Parent with respect to the Transactions. To
Parent’s Knowledge with respect, as of the date hereof, the Equity Financing Agreements are in full force and effect and have not been
withdrawn or terminated, or otherwise amended or modified, in any respect, and no withdrawal, termination, amendment or modification is
contemplated by Parent. Each Equity Financing Agreement is a legal, valid and binding obligation of Parent and, to Parent’s Knowledge,
each Equity Financing Investor. As of the date hereof, Parent does not know of any facts or circumstances that may reasonably be expected
to result in any of the conditions set forth in any Equity Financing Agreement not being satisfied, or the
Equity Financing Amount not being available to Parent, on the Closing Date. No event has occurred that, with or without notice, lapse of time
or both, would constitute a default or breach on the part of Parent under any material term or condition of any Equity Financing Agreement
and, as of the date hereof, Parent has no reason to believe that it will be unable to satisfy in all material respects on a timely basis any term
or condition of closing to be satisfied by it contained in any Equity Financing Agreement. The Equity Financing Agreements contain all of the
conditions precedent (other than the conditions contained in the other Transaction Agreements) to the obligations of the Equity Financing
Investor to contribute to Parent the applicable portion of the Equity Financing Amount set forth in the applicable Equity Financing Agreement
on the terms therein.
Section 5.14 Trust Account.
(a) As of the date hereof, Parent has not less than $552,000,000 in a trust account (the “Trust Account”), maintained and invested
pursuant to that certain Investment Management Trust Agreement (the “Trust Agreement”) effective as of April 6, 2021, by and between
Parent and Continental Stock Transfer & Trust Company, a New York corporation (“Continental”), for the benefit of its public stockholders,
with such funds invested in United States Government securities or money market funds meeting all of the applicable conditions under Rule
2a-7 promulgated under the Investment Company Act. Other than pursuant to the Trust Agreement and the Equity Financing Agreements,
the obligations of Parent under this Agreement are not subject to any conditions regarding Parent’s, its Affiliates’, or any other Person’s ability
to obtain financing for the consummation of the Transactions.
(b) The Trust Agreement has not been amended or modified and is valid and in full force and effect and is enforceable in accordance
with its terms, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally or by principles governing the availability of equitable remedies. Parent has complied in all material
respects with the terms of the Trust Agreement and is not in breach thereof or default thereunder and there does not exist under the Trust
Agreement any event which, with the giving of notice or the lapse of time, would constitute such a breach or default by Parent or, to the
Knowledge of Parent, Continental. There are no separate Contracts, side letters or other understandings (whether written or unwritten,
express or implied): (i) between Parent and Continental that would cause the description of the Trust Agreement in the Parent SEC Reports
to be inaccurate in any material respect; or (ii) that would entitle any Person (other than stockholders of Parent holding Parent Class A Stock
sold in Parent’s initial public offering who shall have elected to redeem their shares of Parent Class A Stock pursuant to Parent’s Charter
Documents) to any portion of the proceeds in the Trust Account. Prior to the Closing, none of the funds held in the Trust Account may be
released except: (A) to pay income and franchise taxes from any interest income earned in the Trust Account; and (B) to redeem Parent
Class A Stock in accordance with the provisions of Parent’s Charter Documents. There are no Legal Proceedings pending or, to the
Knowledge of Parent, threatened in writing with respect to the Trust Account. Parent has performed all material obligations required to be
performed by it to date under, and is not in default, breach or delinquent in performance or any other respect (claimed or actual) in
connection with, the Trust Agreement, and no event has occurred which, with due notice or lapse of time or both, would constitute such a
default or breach thereunder. As of the Effective Time, the obligations of Parent to dissolve or liquidate pursuant to Parent’s Charter
Documents shall terminate, and as of the Effective Time, Parent shall have no obligation whatsoever pursuant to Parent’s Charter
Documents to dissolve and liquidate the assets of Parent by reason of the consummation of the transactions contemplated hereby. To the
Knowledge of Parent, following the Effective Time, no stockholder of Parent shall be entitled to receive any amount from the Trust Account
except to the extent such stockholder of Parent validly elects to redeem their shares of Parent Class A Stock. As of the date hereof,
assuming the accuracy of the representations and warranties of the Company contained herein and the compliance by the Company with its
obligations hereunder, neither Parent nor Merger Sub have any reason to believe that any of the conditions to the use of funds in the Trust
Account will not be satisfied or funds available in the Trust Account will not be available to Parent and Merger Sub on the Closing Date.
Section 5.15 Taxes.
(a) All material Tax Returns required to be filed by Parent have been timely filed (after giving effect to any valid extensions) and all
such Tax Returns are true, correct and complete in all material respects.
(b) Parent has paid all material amounts of its Taxes which are due and payable. All material Taxes incurred but not yet due and have
been accrued on the books and records of Parent.
(c) Parent has complied in all material respects with all Applicable Legal Requirements relating to withholding and remittance of all
material amounts of Taxes and all material amounts of Taxes required by Applicable Legal Requirements to be withheld by Parent have been
withheld and paid over to the appropriate Governmental Entity.
(d) No deficiency for any material amount of Taxes has been asserted or assessed by any Governmental Entity in writing against
Parent (nor to the Knowledge of Parent is there any), which deficiency has not been paid or resolved. No material audit or other proceeding
by any Governmental Entity is currently pending or threatened in writing against Parent with respect to any Taxes due from Parent (and, to
the Knowledge of Parent, no such audit is pending or contemplated).
(e) There are no Tax indemnification agreements or Tax sharing agreements under which Parent could be liable after the Closing Date
for the Tax liability of any Person other than Parent or Merger Sub, except for customary agreements or arrangements with customers,
vendors, lessors, lenders and the like or other similar agreements, in each case, that do not relate primarily to Taxes.
(f) Parent has not consented to extend the time in which any material Tax may be assessed or collected by any Governmental Entity
(other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business), which extension is still in effect
and no written request for any such waiver or extension is currently pending.
(g) Parent will not be required to include any material item of income in, or exclude any material item or deduction from, taxable income
for any taxable period beginning after the Closing Date or, in the case of any taxable period beginning on or before and ending after the
Closing Date, the portion of such period beginning after the Closing Date, as a result of: (i) an installment sale or open transaction disposition
that occurred on or prior to the Closing; (ii) any change in method of accounting on or prior to the Closing, including by reason of the
application of Section 481 of the Code (or any analogous provision of state, local or foreign Tax Legal Requirements); (iii) other than in the
ordinary course of business a prepaid amount received or deferred revenue recognized on or prior to the Closing; (iv) any intercompany
transaction or excess loss account described in the Treasury Regulations under Section 1502 (or any corresponding or similar provision of
state or local Tax Legal Requirements) that occurred or existed prior to the Closing; (v) any closing agreement pursuant to Section 7121 of
the Code or any similar provision of state, local or foreign Tax Legal Requirements entered into prior to the Closing; or (vi) an inclusion under
Section 965 of the Code.
(h) There are no liens for material amounts of Taxes (other than Permitted Liens) upon any of Parent’s assets.
(i) Parent has not entered into a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).
(j) Parent: (i) does not have any liability for the Taxes of another Person (other than Parent or Merger Sub) pursuant to Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Tax Legal Requirement) or as a transferee or a successor; and
(ii) has never been a member of an affiliated, consolidated, combined or unitary group filing for U.S. federal, state or local income Tax
purposes, other than a group the common parent of which was and is Parent.
(k) Parent does not have a permanent establishment in any country other than the country of its organization or has been subject to
income Tax in a jurisdiction outside the country of its organization, in each case, where it is required to file a material income Tax Return and
does not file such Tax Return.
(l) No claim has been made in writing (nor to the Knowledge of Parent is any such claim pending or contemplated) by any
Governmental Entity in a jurisdiction in which Parent does not file Tax Returns that is or may be subject to taxation by, or required to file Tax
Returns in that jurisdiction.
(m) Parent is not, and has not been at any time during the five (5) year period ending on the Closing Date, a “United States real
property holding corporation” within the meaning of Section 897(c)(2) of the Code.
(n) As of the date of this Agreement, Parent is not aware of any fact or circumstances that could reasonably be expected to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 5.16 Information Supplied. None of the information supplied or to be supplied by Parent for inclusion or incorporation by
reference in the Registration Statement or the Proxy Statement/Prospectus will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under
which they are made, not misleading at (a) the time that such information is filed with the SEC (provided, if such information is revised by any
subsequently filed amendment to the Registration Statement prior to the time that the Registration Statement is declared effective by the
SEC, this clause (a) shall solely refer to the time of such subsequent revision); (b) at the time the Registration Statement is declared effective
by the SEC; (c) the time that the Proxy Statement/Prospectus included in the Registration Statement is first mailed to the holders of Parent
Class A Stock; or (d) at the time of the Special Meeting. Notwithstanding the foregoing, Parent makes no representation, warranty or
covenant with respect to: (a) statements made or incorporated by reference therein based on information supplied by the Company or the
Company Subsidiaries for inclusion or incorporation by reference in the Proxy Statement/Prospectus; or (b) any projections or forecasts
included in the Proxy Statement/Prospectus.
Section 5.17 Employees; Benefit Plans. Other than any former officers or as described in the Parent SEC Reports, Parent has never
had any employees. Other than reimbursement of any out-of-pocket expenses incurred by Parent’s officers and directors in connection with
activities on Parent’s behalf in an aggregate amount not in excess of the amount of cash held by Parent outside of the Trust Account, Parent
has no unsatisfied material liability with respect to any employee. Parent does not currently maintain or have any direct liability under any
benefit plan, and neither the execution and delivery of this Agreement or the other Transaction Agreements nor the consummation of the
Transactions will, either alone or in connection with any other event: (a) result in any payment (including severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director, officer, employee of, or any other individual service
provider to Parent; (b) result in the acceleration of the time of payment or vesting of any such benefits; or (c) give rise to any “excess
parachute payment” as defined in Section 280G(b)(1) of the Code or any excise tax owing under Section 4999 of the Code.
Section 5.18 Board Approval; Stockholder Vote. The board of directors of Parent and Merger Sub (including any required committee or
subgroup of the board of directors of Parent or Merger Sub, as applicable), as of the date of this Agreement: (a) approved and declared the
advisability of this Agreement, the other Transaction Agreements and the consummation of the Transactions; and (b) determined that the
consummation of the Transactions is in the best interest of, as applicable, the stockholders of Parent or Merger Sub (as applicable). Other
than the approval of the Parent Stockholder Matters, no other corporate proceedings on the part of Parent are necessary to approve the
consummation of the Transactions.
Section 5.19 Title to Assets. Subject to the restrictions on use of the Trust Account set forth in the Trust Agreement, Parent owns good
and marketable title to, or holds a valid leasehold interest in, or a valid license to use, all of the assets used by Parent in the operation of its
business and which are material to Parent, free and clear of any Liens (other than Permitted Liens).
Section 5.20 Affiliate Transactions. Except as described in the Parent SEC Reports, no Contract between Parent, on the one hand,
and any of the present or former directors, officers, employees, stockholders or warrant holders or Affiliates of Parent (or an immediate family
member of any of the foregoing), on the other hand, will continue in effect following the Closing, other than any such Contract that is not
material to Parent.
Section 5.21 Brokers. Other than fees or commissions for which Parent will be solely responsible, none of Parent, Merger Sub, or any
of their respective Affiliates, including Sponsor, has any liability or
obligation to pay, or is entitled to receive, any fees or commissions to any broker, finder or agent with respect to the Transactions.
Section 5.22 Disclaimer of Other Warranties. PARENT AND MERGER SUB HEREBY ACKNOWLEDGE THAT, EXCEPT AS
EXPRESSLY PROVIDED IN ARTICLE IV, NONE OF THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
AFFILIATES OR REPRESENTATIVES HAS MADE, IS MAKING, OR SHALL BE DEEMED TO MAKE ANY REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, TO PARENT, MERGER SUB, ANY OF THEIR
RESPECTIVE AFFILIATES OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT TO THE COMPANY STOCKHOLDERS
(OR ANY HOLDER OF DERIVATIVE SECURITIES OF THE COMPANY), ANY OF THE GROUP COMPANIES OR ANY OF THE
DIRECTORS, OFFICERS, EMPLOYEES, BUSINESSES, ASSETS OR PROPERTIES OF THE FOREGOING, OR OTHERWISE,
INCLUDING ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, FUTURE
RESULTS, PROPOSED BUSINESSES OR FUTURE PLANS. WITHOUT LIMITING THE FOREGOING AND NOTWITHSTANDING
ANYTHING TO THE CONTRARY: (a) NONE OF THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
AFFILIATES OR REPRESENTATIVES SHALL BE DEEMED TO MAKE TO PARENT, MERGER SUB, OR THEIR RESPECTIVE AFFILIATES
OR REPRESENTATIVES ANY REPRESENTATION OR WARRANTY OTHER THAN AS EXPRESSLY MADE BY THE COMPANY TO
PARENT AND MERGER SUB IN ARTICLE IV; AND (b) NONE OF THE COMPANY NOR ANY OF ITS SUBSIDIARIES, NOR THEIR
RESPECTIVE AFFILIATES OR REPRESENTATIVES, HAS MADE, IS MAKING, OR SHALL BE DEEMED TO MAKE TO PARENT, MERGER
SUB, OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES OR ANY OTHER PERSON ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO: (i) THE INFORMATION DISTRIBUTED OR MADE AVAILABLE TO PARENT
OR ITS REPRESENTATIVES BY OR ON BEHALF OF THE COMPANY IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS; (ii) ANY MANAGEMENT PRESENTATION, CONFIDENTIAL INFORMATION MEMORANDUM OR SIMILAR DOCUMENT;
OR (iii) ANY FINANCIAL PROJECTION, FORECAST, ESTIMATE, BUDGET OR SIMILAR ITEM RELATING TO THE COMPANY, ANY OF
ITS SUBSIDIARIES AND/OR THE BUSINESS, ASSETS, LIABILITIES, PROPERTIES, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROJECTED OPERATIONS OF THE FOREGOING. EACH OF PARENT AND MERGER SUB HEREBY
ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY PROMISE, REPRESENTATION OR WARRANTY THAT IS NOT EXPRESSLY SET
FORTH IN ARTICLE IV, OF THIS AGREEMENT. EACH OF PARENT AND MERGER SUB ACKNOWLEDGES THAT IT HAS CONDUCTED,
TO ITS SATISFACTION, AN INDEPENDENT INVESTIGATION AND VERIFICATION OF THE COMPANY, ITS SUBSIDIARIES AND THE
BUSINESS, ASSETS, LIABILITIES, PROPERTIES, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROJECTED
OPERATIONS OF THE FOREGOING AND, IN MAKING ITS DETERMINATION TO PROCEED WITH THE TRANSACTIONS, EACH OF
PARENT AND MERGER SUB HAS RELIED ON THE RESULTS OF ITS OWN INDEPENDENT INVESTIGATION AND VERIFICATION, IN
ADDITION TO THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY EXPRESSLY AND SPECIFICALLY SET FORTH IN
ARTICLE IV, OF THIS AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 5.22, CLAIMS AGAINST
THE COMPANY OR ANY OTHER PERSON SHALL NOT BE LIMITED IN ANY RESPECT IN THE EVENT OF INTENTIONAL FRAUD IN
THE MAKING THE OF THE REPRESENTATIONS AND WARRANTIES IN ARTICLE IV, BY SUCH PERSON.
ARTICLE VI
CONDUCT PRIOR TO THE CLOSING DATE
Section 6.1 Conduct of Business by the Company and the Company Subsidiaries. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, the Company shall, and shall cause
the Company Subsidiaries to, use its commercially reasonable efforts to carry on its business in the ordinary course, except: (a) to the extent
that Parent shall otherwise consent in writing (such consent not to be unreasonably withheld, conditioned or delayed); (b) as expressly
contemplated by this Agreement or the Company Disclosure Letter or (c) as may be required by Applicable Legal Requirements (including
Pandemic Measures). Without limiting the generality of the foregoing, except as required or expressly permitted by the terms of this
Agreement, as
set forth on Schedule 6.1 of the Company Disclosure Letter, or as required by Applicable Legal Requirements (including Pandemic
Measures), without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed; and Parent
consent or denial of consent to be provided within 48 hours of receipt (the “Consent Timeframe”) of Company consent request, and if no such
response is received by the Company within the Consent Timeframe, then Parent consent shall be deemed received by the Company),
during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or
the Closing, the Company shall not, and shall cause the Company Subsidiaries not to, do any of the following:
(a) except as otherwise required by any existing Company Benefit Plan, this Agreement or Applicable Legal Requirements: (i) grant or
pay any severance or change of control pay or benefits to, or otherwise increase the severance or change of control pay or benefits of, any
current or former employee, director or independent contractor; (ii) enter into, amend (other than immaterial amendments) or terminate any
Company Benefit Plan or any employee benefit plan, policy, program, agreement, trust or arrangement that would have constituted an
Company Benefit Plan if it had been in effect on the date of this Agreement (other than annual renewal of welfare plans in the ordinary
course of business that does not result in a material increase in cost to the Group Companies); (iii) take any action to accelerate the vesting
or payment of, or otherwise fund or secure the payment of, any compensation or benefits under any Company Benefit Plan; or (iv) enter into,
amend or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization
respecting employees of the Group Companies;
(b) (i) transfer, sell, assign, license, sublicense, encumber, impair, abandon, fail to diligently maintain, transfer or otherwise dispose of
any right, title or interest of the Company in any Owned Intellectual Property or Licensed Intellectual Property, in each case, that is material to
any of the businesses of the Group Companies (other than in connection with Permitted Transactions); (ii) extend, amend, waive, cancel or
modify any material rights in or to any Owned Intellectual Property or Licensed Intellectual Property, in each case, where such extension,
amendment, waiver, cancellation or modification would be material to any business of the Group Companies; (iii) fail to diligently prosecute
the Patent applications owned by and material to the Company other than applications the Company, in the exercise of its good faith
business judgment, has determined to abandon; or (iv) divulge, furnish to or make accessible any Trade Secrets constituting material Owned
Intellectual Property or any Trade Secrets of any Person to whom any Group Company has a confidentiality obligation to any third party who
is not subject to an enforceable written agreement to maintain the confidentiality of such Trade Secrets, other than, in each of (i) through (iv),
in the ordinary course of business; provided, that in no event shall the Company license on an exclusive basis or sell any material Owned
Intellectual Property;
(c) except for transactions solely among the Group Companies: (i) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock; (ii) repurchase,
redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any membership interests, capital stock or any other
equity interests, as applicable, in any Group Company, other than pursuant to the terms of a Company Option or Company Restricted Stock
Award; (iii) grant, issue, sell or otherwise dispose, or authorize to issue, sell, or otherwise dispose any membership interests, capital stock or
any other equity interests (such as stock options, stock units, restricted stock or other Contracts for the purchase or acquisition of such
capital stock, except as otherwise contemplated by this Agreement), as applicable, in any Subsidiary; (iv) declare, set aside or pay any
dividend or make any other distribution; or (v) issue, deliver, sell, authorize, pledge or otherwise encumber, or agree to any of the foregoing
with respect to, any shares of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable
for shares of capital stock or other equity securities or ownership interests, or subscriptions, rights, warrants or options to acquire any shares
of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock
or other equity securities or other ownership interests, or enter into other agreements or commitments of any character obligating it to issue
any such shares, equity securities or other ownership interests or convertible or exchangeable securities, except as otherwise contemplated
by this Agreement;
(d) amend its Charter Documents, or form or establish any Subsidiary;
(e) (i) merge, consolidate or combine with any Person; or (ii) acquire or agree to acquire by merging or consolidating with, purchasing
any equity interest (other than equity at fair market value as consideration for payment of an in-license transaction for a third party’s
Intellectual Party rights) in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof;
(f) sell, lease, license, sublicense, abandon, divest, transfer, cancel, abandon or permit to lapse or expire, dedicate to the public, or
otherwise dispose of, any material assets (other than Intellectual Property) or material properties, other than any sale, lease or disposition in
the ordinary course of business or as set forth on Schedule 6.1(f) of the Company Disclosure Letter;
(g) (i) issue or sell any debt securities or rights to acquire any debt securities of any of the Group Companies or guarantee any debt
securities of another Person; (ii) make, incur, create or assume any loans, advances or capital contributions to, or investments in, or
guarantee any Indebtedness of, any Person other than any of the Group Companies except for (A) loans, advances or capital contributions
pursuant to and in accordance with the terms of agreements or legal obligations existing as of the date of this Agreement, in each case set
forth on Schedule 6.1(g) of the Company Disclosure Letter; provided, that any such amounts do not exceed $250,000 in the aggregate and
remain with the Company for general working capital expenditures in the ordinary course of business and (B) equipment financing
arrangements entered into in the ordinary course of business; (iii) except in the ordinary course of business, create any material Liens on any
material property or assets of any of the Group Companies in connection with any Indebtedness thereof (other than Permitted Liens); or (iv)
cancel or forgive any Indebtedness owed to any of the Group Companies;
(h) release, assign, compromise, settle or agree to settle any Legal Proceeding material to the Group Companies, taken as a whole;
(i) except in the ordinary course of business, waive, delay the exercise of, release or assign any material rights or claims under any
Company Material Contract or Material Current Government Contract;
(j) except in the ordinary course of business, modify, amend or terminate in a manner that is materially adverse to the applicable Group
Companies, taken as a whole, any Company Material Contract or Material Current Government Contract (other than pursuant to (i) offers,
bids or proposals made by any Group Company on or prior to the date hereof that, if accepted, would result in a Government Contract or (ii)
requirements from any Governmental Entity to modify the scope of work under any Government Contract);
(k) except as required by U.S. GAAP (or any interpretation thereof) or Applicable Legal Requirements, make any change in accounting
methods, principles or practices (regardless whether for general financial or tax purposes or any change in depreciation or amortization
policies or rates adopted therein);
(l) (i) make or rescind any material Tax election; (ii) settle or compromise any material Tax claim; (iii) change (or request to change) any
method of accounting for Tax purposes; (iv) file any amendment to any material Tax Return; (v) waive or extend any statute of limitations in
respect of a period within which an assessment or reassessment of material Taxes may be issued (other than any extension pursuant to an
extension to file any Tax Return); (vi) knowingly surrender any claim for a material refund of Taxes; (vii) enter into any “closing agreement” as
described in Section 7121 of the Code (or any similar Legal Requirement) with any Governmental Entity; (viii) incur any material liability for
Taxes other than in the ordinary course of business; (ix) incur any liability for Taxes other than in the ordinary course of business; (x) take any
action that would reasonably be expected to prevent, impair or impede the Intended Tax Treatment; or (xi) authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation, restructuring, recapitalization, dissolution or winding-up of the
Company or any Company Subsidiary;
(m) subject to clause (c) above, enter into or amend any agreement with, or pay, distribute or advance any assets or property to, any of
its officers, directors, employees, partners, stockholders or other Affiliates, other than payments or distributions relating to obligations in
respect of arms-length commercial transactions pursuant to the agreements set forth on Schedule 6.1(m) of the Company Disclosure Letter
as existing on the date of this Agreement;
(n) engage in any material new line of business; or
(o) agree in writing or otherwise agree, commit or resolve to take any of the actions described in Section 6.1(a) through (n) above.
The Company also hereby agrees to provide Parent with notice prior to taking any of the following actions: (i) enter into any Contract
that would have been a Company Material Contract (including a Company Material Contract memorializing a Permitted Transaction) or
Material Current Government Contract (other than pursuant to offers, bids or proposals made by any Group Company on or prior to the date
hereof that, if accepted, would result in a Government Contract) had it been entered into prior to the date of this Agreement; (ii) materially
amend any Company Material Contract or Material Current Government Contract, (iii) incur or enter into a Contract requiring the Company to
make any capital expenditures in excess of $400,000 in any 12-month period, in each of (i) through (iii), outside the ordinary course of
business.
Notwithstanding anything to the contrary herein, the Company may, in connection with COVID-19, take such actions in good faith as
are reasonably necessary (x) to protect the health and safety of the Company’s employees and other individuals having business dealings
with the Company or (y) to respond to third-party supply or service disruptions caused by COVID-19, including, but not limited to Pandemic
Measures, and any such actions taken (or not taken) as a result of, in response to, or otherwise related to COVID-19 shall be deemed to be
taken in the “ordinary course of business” for all purposes of this Section 6.1 and not be considered a breach of this Section 6.1; provided
that, to the extent that the Company took any actions pursuant to the immediately preceding clause that caused deviations from its business
being conducted in the ordinary course of business, the Company shall resume conducting its business in the ordinary course of business in
all material respects as soon as reasonably practicable.
Nothing contained in this Agreement shall give Parent, directly or indirectly, any right to control or direct the operations of the Group
Companies prior to the Closing. Prior to the Closing, each of the Company and Parent shall exercise, consistent with the other terms and
conditions of this Agreement, complete control and supervision over their respective businesses.
Section 6.2 Conduct of Business by Parent and Merger Sub. During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the Closing, Parent shall, and shall cause its Subsidiaries to, use its
commercially reasonable efforts to carry on its business in the ordinary course, except to the extent that the Company shall otherwise
consent in writing or as contemplated by this Agreement (including as contemplated by the Equity Financing Agreements). Without limiting
the generality of the foregoing, except as required or permitted by the terms of this Agreement or as required by Applicable Legal
Requirements (including Pandemic Measures and the Warrant Accounting Issue, respectively), without the prior written consent of the
Company (such consent not to be unreasonably withheld, conditioned or delayed), during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, Parent shall not, and shall cause its
Subsidiaries not to, do any of the following:
(a) declare, set aside or pay dividends on or make any other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock (or warrant) or split, combine or reclassify any capital stock (or warrant), effect a recapitalization or issue or
authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock or warrant, or effect any like
change in capitalization;
(b) purchase, redeem or otherwise acquire, directly or indirectly, any equity securities of Parent or any of its Subsidiaries;
(c) other than in connection with the Equity Financing Agreements, grant, issue, deliver, sell, authorize, pledge or otherwise encumber,
or agree to any of the foregoing with respect to, any shares of capital stock or other equity securities or any securities convertible into or
exchangeable for shares of capital stock or other equity securities, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or other equity securities or any securities convertible into or exchangeable for shares of capital stock or other equity securities,
or enter into other agreements or commitments of any character
obligating it to issue any such shares of capital stock or equity securities or convertible or exchangeable securities;
(d) amend its Charter Documents or form or establish any Subsidiary;
(e) (i) merge, consolidate or combine with any Person; or (ii) acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets, or enter into any joint
ventures, strategic partnerships or alliances;
(f) incur any Indebtedness or guarantee any such Indebtedness of another Person or Persons, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of Parent, as applicable, enter into any “keep well” or other agreement to
maintain any financial statement condition or enter into any arrangement having the economic effect of any of the foregoing, in each case,
except in the ordinary course of business; provided, however, that Parent shall be permitted to incur Indebtedness (which shall constitute
Parent Transaction Costs) from its Affiliates and stockholders in order to meet its reasonable capital requirements, with any such loans to be
made only as reasonably required by the operation of Parent in due course on a non-interest basis and otherwise on arm’s-length terms and
conditions and repayable at Closing;
(g) except as required by GAAP (or any interpretation thereof) or Applicable Legal Requirements, make any change in accounting
methods, principles or practices;
(h) (i) make or rescind any material Tax election (ii) settle or compromise any material Tax claim; (iii) change (or request to change) any
method of accounting for Tax purposes; (iv) file any amendment to any material Tax Return; (v) waive or extend any statute of limitations in
respect of a period within which an assessment or reassessment of material Taxes may be issued (other than any extension pursuant to an
extension to file any Tax Return); (vi) knowingly surrender any claim for a refund of Taxes; or (vii) enter into any “closing agreement” as
described in Section 7121 of the Code (or any similar Legal Requirement) with any Governmental Entity; (viii) create any material Liens on
any material property or assets of Parent or Merger Sub; (ix) incur any liability for Taxes other than in the ordinary course of business; or (x)
take any action or fail to take any action that would reasonably be expected to prevent, impair or impede the Intended Tax Treatment;
(i) liquidate, dissolve, reorganize or otherwise wind up the business or operations of Parent or Merger Sub;
(j) commence, settle or compromise any Legal Proceeding;
(k) engage in any material new line of business;
(l) amend the Trust Agreement or any other agreement related to the Trust Account;
(m) (i) adopt or amend any employee benefit plan, or enter into any employment contract or collective bargaining agreement other than
the LTIP or the ESPP, or (ii) hire any employee or any other individual to provide services to Parent or its Subsidiaries;
(n) (i) enter into any Parent Material Contract or other Contract that will not be terminable for convenience on or before Closing without
requiring the payment of any amount or any post-Closing liability or obligation, (ii) modify, amend or terminate any Parent Material Contract or
(iii) waive, delay the exercise of, release or assign any material rights or claims under any Parent Material Contract;
(o) make any expenditures utilizing funds in the Trust Account; or
(p) agree in writing or otherwise agree, commit or resolve to take any of the actions described in Sections 6.2(a) through (o) above.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Proxy Statement/Prospectus; Registration Statement; Special Meeting.
(a) As promptly as practicable and with the parties hereto using commercially reasonable efforts to file after the execution of this
Agreement and the delivery of the PCAOB Financial Statements, (i) Parent, Merger Sub and the Company shall jointly prepare, and upon the
prior approval of both Parent and the Company, Parent shall file with the SEC, a registration statement on Form S-4 (the “Registration
Statement”), containing a proxy statement/prospectus (the “Proxy Statement/Prospectus”), in preliminary form, to be filed with the SEC in
connection with the Special Meeting for the purpose of, among other things: (A) providing Parent’s stockholders with the opportunity to
redeem shares of Parent Class A Stock (the “Parent Stockholder Redemption”); (B) soliciting proxies from holders of Parent Class A Stock to
vote at the Special Meeting in favor of: (1) the adoption of this Agreement and approval of the Transactions; (2) the issuance of shares of
Parent Class A Stock in connection with Section 2.6 and the issuance of shares of Parent Class A in connection with the Equity Financing
Agreements; (3) the adoption of the Parent A&R Charter; (4) adoption of the LTIP and ESPP; and (5) any other proposals the Parties deem
reasonably necessary or desirable to consummate the Transactions (collectively, the “Parent Stockholder Matters”); and (C) the registration
under the Securities Act of the issuance of the Closing Number of Securities and the Earn-Out Shares. Each of Parent, the Merger Sub and
the Company shall use its reasonable efforts to cause the Registration Statement and the Proxy Statement/Prospectus to comply with the
rules and regulations promulgated by the SEC, to have the Registration Statement declared effective under the Securities Act as promptly as
practicable after such filing and to keep the Registration Statement effective as long as is necessary to consummate the transactions
contemplated hereby, and to obtain all necessary state securities law or “Blue Sky” approvals required to carry out the transactions
contemplated hereby. Each of Parent, the Merger Sub and the Company agrees to furnish to the other party all information concerning itself,
its Subsidiaries, officers, directors, managers, stockholders, and other equityholders and information regarding such other matters as may be
reasonably necessary or advisable or as may be reasonably requested in connection with the Registration Statement, the Proxy
Statement/Prospectus, a current report on Form 8-K pursuant to the Exchange Act in connection with the transactions, or any other
statement, filing, notice or application made by or on behalf of Parent, the Merger Sub and the Company or their respective Subsidiaries to
any regulatory authority (including Nasdaq) in connection with the Transactions (the “Solicitation Documents”). Parent shall file an
amendment to the Registration Statement containing a definitive Proxy Statement/Prospectus with the SEC and, as promptly as practicable
after the Registration Statement is declared effective under the Securities Act (the “Registration Statement Effective Date”), cause the
definitive Proxy Statement/Prospectus to be mailed to its stockholders of record, as of the record date to be established by the board of
directors of Parent.
(b) If, in connection with the preparation and filing of the Registration Statement, the SEC requests or requires that a tax opinion be
prepared and submitted in connection with such, Parent and the Company shall deliver to White & Case LLP and Goodwin Procter LLP (or,
in each case, other nationally recognized tax counsel described in this Section 7.1(b)), respectively, customary Tax representation letters
satisfactory to its tax counsel, dated and executed as of the date the Registration Statement shall have been declared effective by the SEC
and such other date(s) as determined reasonably necessary by such tax counsel in connection with the preparation and filing of the
Registration Statement. If required by the SEC in connection with the filing of the Registration Statement, Parent shall cause White & Case
LLP (or such other nationally recognized tax counsel to Parent reasonably satisfactory to the Company) to furnish an opinion, subject to
customary assumptions and limitations, regarding the U.S. federal income tax treatment of the transactions contemplated by this Agreement
(including the Intended Tax Treatment) applicable to Parent stockholders and holders of Parent options. If required by the SEC in connection
with the filing of the Registration Statement, the Company shall cause Goodwin Procter LLP (or such other nationally recognized tax counsel
to the Company reasonably satisfactory to Parent) to furnish an opinion, subject to customary assumptions and limitations, to the effect that
the Intended Tax Treatment should apply to the Company Stockholders in connection with the Merger.
(c) Each of Parent and the Company will advise the other party reasonably promptly after such party receives notice thereof, of the
time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualification of the shares of capital
stock of Parent for offering or sale in any jurisdiction, of the initiation or written threat of any proceeding for any such purpose, or of any
request by the SEC for the amendment or supplement of the Registration Statement or for additional information. Each of Parent and the
Company and their counsel shall be given a reasonable opportunity to review and comment on the Registration Statement, the Proxy
Statement/Prospectus and any Solicitation Document each time before any such document is filed with the SEC by Parent or the Company,
and each shall give reasonable and good faith consideration to any comments made by the other parties and their counsel. Each of Parent
and the Company shall provide the other parties and their counsel with (i) any comments or other communications, whether written or oral,
that such party or its counsel may receive from time to time from the SEC or its staff with respect to the Registration Statement, the Proxy
Statement/Prospectus or the Solicitation Documents promptly after receipt of those comments or other communications and (ii) a reasonable
opportunity to participate in the response of such party to those comments and to provide comments on that response (to which reasonable
and good faith consideration shall be given), including by participating with the other parties or their counsel in any discussions or meetings
with the SEC. Parent shall promptly respond to any SEC comments on the Registration Statement, the Proxy Statement/Prospectus or the
Solicitation Documents and shall use its reasonable best efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable. Each of Parent and the Company shall cooperate and mutually agree upon (such agreement not to be unreasonably
withheld or delayed) any response to comments of the SEC or its staff with respect to the Registration Statement and any amendment to the
Registration Statement filed in response thereto.
(d) If, at any time prior to the Closing, Parent or the Company discovers or becomes aware of any information that should be set forth
in an amendment or supplement to the Registration Statement or the Proxy Statement/Prospectus so that the Proxy Statement/Prospectus
would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, such party shall inform the other parties, and Parent shall prepare (and the
Company shall cooperate in preparing, to the extent necessary) and promptly file (with the Company’s prior written consent, such consent
not to be unreasonably withheld, conditioned or delayed) an appropriate amendment or supplement to the Registration Statement or the
Proxy Statement/Prospectus containing such information and, to the extent required by Legal Requirements, transmit to Parent’s
stockholders such amendment or supplement to the Proxy Statement/Prospectus containing such information.
(e) As soon as reasonably practicable and using commercially reasonable efforts, the Company shall deliver to Parent (A) audited
consolidated balance sheets as of December 31, 2020 and 2019 and consolidated statements of operations and comprehensive (loss)
income, stockholders’ deficit and cash flows of the Group Companies for the 12-month periods ended December 31, 2020 and 2019 together
with the auditor’s reports thereon, which comply in all material respects with the applicable accounting requirements and with the rules and
regulations of the SEC, the Exchange Act and the Securities Act applicable to a registrant (collectively, the “PCAOB Financial Statements”);
provided, that, upon delivery of such PCAOB Financial Statements, such financial statements shall be deemed “Audited Financial
Statements” for all the purposes of this Agreement and the representation and warranties set forth in Section 4.8 shall be deemed to apply to
such Audited Financial Statements with the same force and effect as if made as of the date of this Agreement; (B) all other audited and
unaudited financial statements of the Group Companies and any company or business units acquired by it, as applicable, required under the
Applicable Legal Requirements of the SEC to be included in the Proxy Statement/Prospectus and/or the Closing Form 8-K (including pro
forma financial information); (C) all selected financial data of the Group Companies required by Item 301 of Regulation S-K, as necessary for
inclusion in the Proxy Statement/Prospectus and the Closing Form 8-K; and (D) management’s discussion and analysis of financial condition
and results of operations prepared in accordance with Item 303 of Regulation S-K of the SEC with respect to the periods ended December
31, 2020 and 2019, as necessary for inclusion in the Proxy Statement/Prospectus and Closing Form 8-K (including pro forma financial
information).
(f) Parent shall, as promptly as practicable following the Registration Statement Effective Date, establish a record date (which date
shall be mutually agreed with the Company) for, duly call and give notice of, the Special Meeting. Parent shall convene and hold, no later
than 30 days (which may be
extended to 45 days if Parent determines it is desirable to do so, after consultation with the Company) after the Proxy Statement/Prospectus
is mailed, a meeting of Parent’s stockholders (the “Special Meeting”), for the purpose of obtaining the approval of the Parent Stockholder
Matters. Parent shall use its reasonable best efforts to obtain the approval of the Parent Stockholder Matters at the Special Meeting,
including by soliciting proxies as promptly as practicable in accordance with Applicable Legal Requirements for the purpose of seeking the
approval of the Parent Stockholder Matters. Subject to the proviso in the following sentence, Parent shall include the Parent
Recommendation in the Proxy Statement/Prospectus. Except as otherwise required by Applicable Legal Requirements, the board of directors
of Parent shall not (and no committee or subgroup thereof shall) change, withdraw, withhold, qualify or modify, or publicly propose to change,
withdraw, withhold, qualify or modify, the Parent Recommendation (a “Change in Recommendation”). Parent agrees that its obligation to
establish a record date for, duly call, give notice of, convene and hold the Special Meeting for the purpose of seeking approval of the Parent
Stockholder Matters shall not be affected by any Change in Recommendation, and Parent agrees to establish a record date for, duly call,
give notice of, convene and hold the Special Meeting and submit for the approval of its stockholders the matters contemplated by the Proxy
Statement/Prospectus as contemplated by this Section 7.1(f), regardless of whether or not there shall have occurred any Change in
Recommendation. Notwithstanding anything to the contrary contained in this Agreement, Parent shall be entitled to postpone or adjourn the
Special Meeting: (i) to ensure that any supplement or amendment to the Proxy Statement/Prospectus that the board of directors of Parent
has determined in good faith is required by Applicable Legal Requirements is disclosed to Parent’s stockholders and for such supplement or
amendment to be promptly disseminated to Parent’s stockholders prior to the Special Meeting; (ii) if, as of the time for which the Special
Meeting is originally scheduled (as set forth in the Proxy Statement/Prospectus), there are insufficient shares of Parent Class A Stock
represented (either in person or by proxy) to constitute a quorum necessary to conduct the business to be conducted at the Special Meeting;
(iii) in order to solicit additional proxies from stockholders for purposes of obtaining approval of the Parent Stockholder Matters; or (iv) if the
holders of Parent Class A Stock have elected to redeem a number of Parent Class A Stock as of such time that would reasonably be
expected to result in Parent not satisfying the Company’s Required Funds; provided, that in the event of a postponement or adjournment
pursuant to clauses (i), (ii), (iii) or (iv) above, the Special Meeting shall be reconvened as promptly as practicable following such time as the
matters described in such clauses have been resolved.
Section 7.2 Company Stockholder Approval.
(a) The Company shall take all action necessary to solicit the Company Stockholder Approval via written consent as soon as
practicable after the Registration Statement Effective Date. The Company will provide Parent with copies of all written consents it receives
within one (1) Business Day of receipt of the Company Stockholder Approval. If the Company Stockholder Approval is obtained, then
promptly following the receipt of the required written consents, the Company will prepare and deliver to its stockholders who have not
consented the notice required by Section 228(e) and 262 of the DGCL.
(b) To the extent the Company Stockholder Approval is not delivered pursuant to Section 7.2(a) within one (1) day following the
Registration Statement Effective Date, then the Company shall take all action necessary to duly call, given notice, convene and hold the
Company Stockholders Meeting as soon as practicable, and, in connection therewith, the Company shall (a) mail a stockholder information
statement and proxy solicitation which shall include, without limitation, the Proxy Statement/Prospectus and a notice of dissent and appraisal
rights as required under applicable Delaware law to the holders of Company Common Stock in advance of such meeting for the purpose of
soliciting from the holders of Company Common Stock proxies to vote in favor of the adoption of this Agreement and approval of the Merger;
and (b) take all other actions necessary or advisable to secure the vote or consent of the Company Stockholders required by applicable
Legal Requirements to obtain such approval. The Company shall keep Parent and the Merger Sub updated with respect to proxy solicitation
results as requested by Parent or the Merger Sub. Once the Company Stockholders Meeting has been called and noticed, the Company
shall not postpone or adjourn the Company Stockholders Meeting without the consent of Parent (other than: (i) in order to obtain a quorum of
its stockholders; or (ii) as reasonably determined by the Company to comply with applicable Legal Requirements). The Company shall use its
reasonable best efforts to cooperate with Parent to hold the Company Stockholders Meeting on the same day and at the same time as the
Special
Meeting as soon as reasonably practicable after the date of this Agreement, and to set the same record date for each such meeting.
(c) Unless this Agreement has been terminated in accordance with its terms, the Company’s obligation to solicit written consents from
the Company Stockholders to give the Company Stockholder Approval in accordance with this Section 7.2 shall not be limited or otherwise
affected by the making, commencement, disclosure, announcement or submission of any other acquisition proposal.
Section 7.3 Regulatory Approvals. As promptly as practicable after the date of this Agreement, Parent and the Company shall each
prepare and file the notification required of it under the HSR Act within 10 Business Days after the date hereof in connection with the
Transactions and shall promptly and in good faith respond to all information requested of it by the U.S. Federal Trade Commission, U.S.
Department of Justice or any other Governmental Entity in connection with such notification and otherwise cooperate in good faith with each
other and such Governmental Entities. Each Party will promptly furnish to the other such information and assistance as the other may
reasonably request in connection with its preparation of any filing or submission that is necessary under the HSR Act and will use reasonable
best efforts to cause the expiration or termination of the applicable waiting periods as soon as practicable. Each Party will promptly furnish to
the other such information and assistance as the other may reasonably request in connection with its preparation of any filing or submission
that is necessary under the HSR Act or any other Antitrust Laws and will use reasonable best efforts to cause the expiration or termination of
the applicable waiting periods or obtain the applicable approvals as soon as practicable. Each Party will promptly provide the other with
copies of all substantive written communications (and memoranda setting forth the substance of all substantive oral communications)
between each of them, any of their Affiliates and their respective agents, representatives and advisors, on the one hand, and any
Governmental Entity, on the other hand, with respect to this Agreement or the Transactions. Without limiting the foregoing, Parent and the
Company shall: (i) promptly inform the other of any communication to or from the U.S. Federal Trade Commission, the U.S. Department of
Justice or any other Governmental Entity regarding the Transactions; (ii) permit each other to review in advance any proposed substantive
written communication to any such Governmental Entity and incorporate reasonable comments thereto; (iii) give the other prompt written
notice of the commencement of any Legal Proceeding with respect to such transactions; (iv) not agree to participate in any substantive
meeting or discussion with any such Governmental Entity in respect of any filing, investigation or inquiry concerning this Agreement or the
Transactions unless, to the extent reasonably practicable, it consults with the other Party in advance and, to the extent permitted by such
Governmental Entity, gives the other Party the opportunity to attend; (v) keep the other reasonably informed as to the status of any such
Legal Proceeding; and (vi) promptly furnish each other with copies of all correspondence, filings (except for filings made under the HSR Act)
and written communications between such Party and their Affiliates and their respective agents, representatives and advisors, on one hand,
and any such Governmental Entity, on the other hand, in each case, with respect to this Agreement and the Transactions. Each of the
Company Transaction Costs and Parent Transaction Costs shall include fifty percent (50%) of any filing fees required by Governmental
Entities, including with respect to any registrations, declarations and filings required in connection with the execution and delivery of this
Agreement, the performance of the obligations hereunder and the consummation of the Transactions, including filing fees in connection with
filings under the HSR Act.
Section 7.4 Other Filings; Press Release.
(a) As promptly as practicable after execution of this Agreement, Parent will prepare and file a current report on Form 8-K pursuant to
the Exchange Act to report the execution of this Agreement, the form and substance of which shall be approved in advance in writing by the
Company.
(b) Promptly after the execution of this Agreement, Parent and the Company shall also issue a joint press release announcing the
execution of this Agreement.
(c) The Parties shall prepare a draft current report on Form 8-K announcing the Closing, together with, or incorporating by reference,
the financial statements prepared by the Company and its accountant, and such other information that may be required to be disclosed with
respect to the Transactions in any report or form to be filed with the SEC (“Closing Form 8-K”). Prior to Closing, Parent and the Company
shall prepare a joint press release announcing the consummation of the Transactions hereunder (“Closing Press
Release”). Concurrently with the Closing, Parent shall issue the Closing Press Release. Concurrently with the Closing, or as soon as
practicable thereafter, Parent shall file the Closing Form 8-K with the SEC.
Section 7.5 Confidentiality; Access to Information.
(a) The Company and Parent each acknowledge that it is a party to the Confidentiality Agreement, the terms of which are incorporated
herein by reference, and the Company and Parent each agree to be bound by the Confidentiality Agreement. Following Closing, the
Confidentiality Agreement shall be superseded in its entirety by the provisions of this Agreement; provided, however, that if for any reason
this Agreement is terminated prior to the Closing, the Confidentiality Agreement shall nonetheless continue in full force and effect in
accordance with its terms. Beginning on the date hereof and ending on the fifth anniversary of this Agreement (but perpetually with respect to
any trade secrets), each Party agrees to maintain in confidence any non-public information received from the other Parties, and to use such
non-public information only for purposes of consummating the Transactions. Such confidentiality obligations will not apply to: (i) information
which was known to one Party or its agents or representatives prior to receipt from the Company or the Company Stockholders, on the one
hand, or Parent or Merger Sub, on the other hand, as applicable; (ii) information which is or becomes generally known to the public without
breach of this Agreement or an existing obligation of confidentiality; (iii) information acquired by a Party or their respective agents or
representatives from a third party who was not bound to an obligation of confidentiality; (iv) information developed by such Party
independently without any reliance on the non-public information received from any other Party; (v) disclosure required by Applicable Legal
Requirement or stock exchange rule; or (vi) disclosure consented to in writing by Parent or Merger Sub (in the case of the Company
Stockholders and, prior to the Closing, the Company) or the Company (in the case of Parent or Merger Sub).
(b) Notwithstanding the foregoing, none of the Parties will make any public announcement or issue any public communication
regarding this Agreement, any other Transaction Agreement or the Transactions or any matter related to the foregoing, without the prior
written consent of the Company, in the case of a public announcement by Parent, or Parent, in the case of a public announcement by the
Company Stockholders or the Company (such consents, in either case, not to be unreasonably withheld, conditioned or delayed), except: (i)
if such announcement or other communication is required by Applicable Legal Requirements, in which case the disclosing Party shall, to the
extent permitted by Applicable Legal Requirements, first allow such other Parties to review such announcement or communication and have
the opportunity to comment thereon and the disclosing Party shall consider such comments in good faith; (ii) in the case of the Company or
the Company Stockholders, Parent and their respective Affiliates, if such announcement or other communication is made in connection with
fundraising or other investment related activities and is made to such Person’s direct and indirect investors or potential investors or financing
sources subject to an obligation of confidentiality; (iii) announcements and communications regarding this Agreement and the Transactions to
the Group Companies’ stockholders, Affiliates, and its and their respective directors, officers, employees, managers and advisors, in each
case subject to an obligation of confidentiality; (iv) to the extent such announcements or other communications contain only information
previously disclosed in a public statement, press release or other communication previously approved in accordance with Section 7.4 or this
Section 7.5(b); (v) announcements and communications to Governmental Entities in connection with registrations, declarations and filings
relating to the Transactions required to be made under this Agreement; and (vi) communications to customers and suppliers of the Group
Companies for purposes of seeking any consents and approvals required in connection with the Transactions.
(c) The Company will afford Parent and its financial advisors, accountants, counsel and other representatives reasonable access
during normal business hours, upon reasonable notice, to the properties, books, records and personnel of the Company during the period
prior to the Closing to obtain all information concerning the business, including the status of business development efforts, properties, results
of operations and personnel of the Company, as Parent may reasonably request in connection with the consummation of the Transactions;
provided, however, that (i) any such access shall be conducted in a manner not to interfere with the businesses or operations of the
Company, (ii) the Company shall not be required to provide access to or to disclose information where such access or disclosure would (x)
contravene any Applicable Legal Requirement, Order or Contract of any Group Companies or, if determined
by the Company in good faith after consulting with counsel, reasonably be expected to result in antitrust risk for the Company, (y) reasonably
be expected to violate or result in a loss or impairment of any attorney client, legal or work product privilege or (z) expose the Company to
risk of liability for disclosure of sensitive or Personal Information, and (iii) the Company shall not be required to provide such access if the
Company in good faith determines, in light of any Pandemic Measures, that such access would reasonably be expected to jeopardize the
health and safety of any Group Company personnel or representatives.
(d) Parent will afford the Company and its financial advisors, underwriters, accountants, counsel and other representatives reasonable
access during normal business hours, upon reasonable notice, to the properties, books, records and personnel of Parent during the period
prior to the Closing to obtain all information concerning the business, including properties, results of operations and personnel of Parent, as
the Company may reasonably request in connection with the consummation of the Transactions; provided, however, that any such access
shall be conducted in a manner not to interfere with the businesses or operations of Parent.
Section 7.6 Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing,
all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the
other Transactions, including using reasonable best efforts to accomplish the following: (i) the taking of commercially reasonable acts
necessary to cause the conditions precedent set forth in Article VIII to be satisfied; (ii) the obtaining of all necessary actions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and the making of all necessary registrations, declarations and
filings (including registrations, declarations and filings with Governmental Entities, if any); (iii) the taking of commercially reasonable acts
necessary to obtain all consents, approvals or waivers from third parties required as a result of the Transactions, including any other
consents, approvals or waivers from third parties referred to on Schedule 7.6(a) of the Company Disclosure Letter, and, in the case of Parent,
to terminate any Contracts to which Parent or Merger Sub is a party that are not required for the operation of the Surviving Corporation
following Closing, if and to the extent reasonably requested by the Company; (iv) the defending of any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Transactions, including seeking to
have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed; and (v) the execution or
delivery of any additional instruments reasonably necessary to consummate, and to fully carry out the purposes of, the Transactions. This
obligation shall include, on the part of Parent, sending a termination letter to Continental substantially in the applicable form attached to the
Trust Agreement (the “Trust Termination Letter”).
(b) Notwithstanding anything herein to the contrary, nothing in this Section 7.6 shall be deemed to require Parent or the Company to
agree to any divestiture by itself or any of its Affiliates of shares of capital stock or of any business, assets or property, the imposition of any
limitation on the ability of any of them to conduct their business or to own or exercise control of their respective assets, properties and capital
stock, or the incurrence of any liability or expense.
(c) From and after the date of this Agreement until the earlier of the Closing and the valid termination of this Agreement pursuant to its
terms, Parent, on the one hand, and the Company, on the other hand, shall each notify the other in writing promptly after learning of any
stockholder demands, inquiries or other stockholder Legal Proceedings (including derivative claims) relating to this Agreement, any
Transaction Agreement or any matters relating thereto other than any appraisal claims contemplated by Section 2.13 (collectively, the
“Transaction Litigation”) commenced against, in the case of Parent or Merger Sub, any of Parent or Merger Sub or any of their respective
Representatives (in their capacity as a representative of Parent or Merger Sub) or, in the case of the Company, any Group Company or any
of their respective Representatives (in their capacity as a representative of a Group Company). Parent and the Company shall each (i) keep
the other reasonably informed regarding any Transaction Litigation, (ii) give the other the opportunity to, at its own cost and expense,
participate in the defense, settlement and compromise of any such Transaction Litigation and reasonably cooperate with the other in
connection with the defense,
settlement and compromise of any such Transaction Litigation and (iii) consider in good faith the other’s advice with respect to any such
Transaction Litigation; provided, however, that in no event shall Parent or Merger Sub, on one hand, or the Company, any other Group
Company, on the other hand, or, in any case, any of their respective Representatives settle or compromise any Transaction Litigation without
the prior written consent of the Company or Parent, as the case may be.
(d) From and after the date of this Agreement, the Company shall use reasonable best efforts to obtain Lock-Up Letters from all
Company Stockholders holding in excess of 1% of the Company’s outstanding capital stock.
Section 7.7 No Parent Securities Transactions. Neither the Company nor any of its controlled Affiliates, directly or indirectly, shall
engage in any transactions involving the securities of Parent prior to the time of the making of a public announcement regarding all of the
material terms of the business and operations of the Company and the Transactions. The Company shall use its commercially reasonable
efforts to require each of its officers, directors and employees to comply with the foregoing requirement.
Section 7.8 No Claim Against Trust Account. For and in consideration of Parent entering into this Agreement, the receipt and
sufficiency of which are hereby acknowledged, the Company, on behalf of itself and its Affiliates agrees that:
(a) neither the Company nor any of its Affiliates do now or at any time hereafter have any right, title, interest or claim of any kind in or
to any monies in the Trust Account or distributions therefrom, and shall not make any claim against the Trust Account (including any
distributions therefrom), in each case, regardless of whether such claim arises as a result of, in connection with or relating in any way to, this
Agreement or the Transactions or any proposed or actual business relationship between Parent or its Representatives, on the one hand, and
the Company or its Representatives, on the other hand, or any other matter, and regardless of whether such claim arises based on contract,
tort, equity or any other theory of legal liability (any and all such claims against the Trust Account are collectively referred to hereafter as the
“Released Claims”);
(b) the Company, on behalf of itself and its Affiliates, hereby irrevocably waives any Released Claims that the Company or any of its
Affiliates may have against the Trust Account (including any distributions therefrom) now or in the future as a result of, or arising out of, any
negotiations, Contracts or agreements with Parent or its Representatives, including this Agreement or the Transactions, and will not seek
recourse against the Trust Account (including any distributions therefrom) in connection therewith (including for an alleged breach of this
Agreement or any other agreement with Parent or its Affiliates);
(c) the irrevocable waiver set forth in the immediately preceding clause (b) is material to this Agreement and specifically relied upon by
Parent and its Affiliates to induce Parent to enter in this Agreement, and the Company further intends and understands such waiver to be
valid, binding and enforceable against the Company and each of its Affiliates under Applicable Legal Requirements; and
(d) to the extent the Company or any of its Affiliates commences any action or proceeding based upon, in connection with, relating to
or arising out of any matter relating to Parent or its Representatives, including this Agreement or the Transactions, which proceeding seeks,
in whole or in part, monetary relief against Parent or Representatives, the Company hereby acknowledges and agrees that the Company’s
and its Affiliates’ sole remedy shall be against funds held outside of the Trust Account and such claim shall not permit the Company or its
Affiliates (or any Person claiming on any of their behalves or in lieu of any of them) to have any claim against the Trust Account (including
any distributions therefrom) or any amounts contained therein.
(e) For the avoidance of doubt, (i) nothing herein shall serve to limit or prohibit the Company’s right to pursue a claim against Parent
pursuant to this Agreement for legal relief against monies or other assets of Parent held outside the Trust Account or for specific performance
or other equitable relief in connection with the Transactions or for intentional fraud in the making of the representations and warranties in
Article V; and (ii) nothing herein shall serve to limit or prohibit any claims that the Company may have in the future pursuant to this
Agreement against Parent’s assets or funds that are not held in the Trust Account.
Section 7.9 Disclosure of Certain Matters. Each of Parent, Merger Sub and the Company will promptly provide the other Parties with
prompt written notice of any event, development or condition of which they have Knowledge that: (a) is reasonably likely to cause any of the
conditions set forth in Article VIII not to be satisfied; or (b) would require any amendment or supplement to the Proxy Statement/Prospectus.
Section 7.10 Securities Listing; Parent Public Filings.
(a) Parent will use its reasonable best efforts to cause the shares of Parent Class A Stock issued in connection with the Transactions
to be approved for listing on Nasdaq at Closing. During the period from the date hereof until the Closing, Parent shall use its reasonable best
efforts to ensure Parent remains listed as a public company on Nasdaq or other national securities exchange and keep the Parent Class A
Stock and Parent Warrants listed for trading on Nasdaq or other national securities exchange. After the Closing, Parent shall use
commercially reasonable efforts to (a) continue the listing for trading of the Parent Class A Stock and Parent Warrants on Nasdaq or other
national securities exchange and (b) in the event any Earn-Out Shares become issuable pursuant to Article III, cause such Earn-Out Shares
to be approved for listing on Nasdaq or other national securities exchange.
(b) From the date hereof through the Closing, Parent will keep current and timely file all reports required to be filed or furnished with
the SEC and otherwise comply in all material respects with its reporting obligations under applicable securities laws.
Section 7.11 No Solicitation.
(a) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Closing, the Company shall not, and shall cause its Subsidiaries not to, and shall direct its stockholders, employees, agents,
officers, directors, representatives and advisors (collectively, in each case in their capacity as such, “Representatives”) not to, directly or
indirectly: (i) solicit, initiate, enter into or continue discussions, negotiations or transactions with, or encourage or respond to any inquiries or
proposals by, or provide any information to, any Person (other than Parent and its agents, representatives, advisors) concerning any merger,
sale of ownership interests and/or assets of the Company, recapitalization or similar transaction (each, a “Company Business Combination”);
(ii) enter into any agreement regarding, continue or otherwise participate in any discussions or negotiations regarding, or cooperate in any
way that would otherwise reasonably be expected to lead to a Company Business Combination; or (iii) commence, continue or renew any
due diligence investigation regarding a Company Business Combination. In addition, the Company shall, and shall cause its Subsidiaries and
the Company Stockholders to, and shall cause their respective Representatives to, immediately cease any and all existing discussions or
negotiations with any Person with respect to any Company Business Combination.
(b) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Closing, Parent and Merger Sub shall not, and shall direct their respective Representatives not to, directly or indirectly: (i)
solicit, initiate, enter into or continue discussions or transactions with, or encourage or respond to any inquiries or proposals by, or provide
any information to, any Person (other than the Company, the Company Stockholders and their respective Representatives) concerning any
merger, purchase of ownership interests or assets of Parent, recapitalization or similar business combination transaction (each, a “Parent
Business Combination”); (ii) enter into any agreement regarding, continue or otherwise participate in any discussions or negotiations
regarding, or cooperate in any way that would otherwise reasonably be expected to lead to a Parent Business Combination; or (iii)
commence, continue or renew any due diligence investigation regarding a Parent Business Combination. Parent and Merger Sub shall, and
shall cause their respective Representatives to, immediately cease any and all existing discussions or negotiations with any Person with
respect to any Parent Business Combination.
(c) Each Party shall promptly (and in no event later than 24 hours after becoming aware of such inquiry, proposal, offer or submission)
notify the other Parties (and in the case of Parent’s receipt of a Parent Business Combination proposal, Parent shall also provide notice to
the Company) if it or, to its Knowledge, any of its or its Representatives receives any inquiry, proposal, offer or submission with respect to a
Company Business Combination or Parent Business Combination, as applicable (including the identity of
the Person making such inquiry or submitting such proposal, offer or submission), after the execution and delivery of this Agreement. If either
Party or its Representatives receives an inquiry, proposal, offer or submission with respect to a Company Business Combination or Parent
Business Combination, as applicable, such Party shall provide the other Parties with a copy of such inquiry, proposal, offer or submission
(and in the case of Parent’s receipt, Parent shall also provide copies to the Company).
Section 7.12 Trust Account. Prior to the Closing, none of the funds held in the Trust Account may be used or released except for the
withdrawal of interest to pay any tax obligation owed by Parent as a result of assets owned by Parent, including franchise taxes. Upon
satisfaction or waiver of the conditions set forth in Article VIII and provision of notice thereof to Continental (which notice Parent shall provide
to Continental in accordance with the terms of the Trust Agreement): (a) in accordance with and pursuant to the Trust Agreement, at the
Closing, Parent: (i) shall cause the documents, opinions and notices required to be delivered to Continental pursuant to the Trust Agreement
to be so delivered, including providing Continental with the Trust Termination Letter; and (ii) shall use best efforts to cause Continental to, and
Continental shall thereupon be obligated to, distribute the Trust Account as directed in the Trust Termination Letter, including all amounts
payable to: (A) to stockholders who elect to have their Parent Class A Stock converted to cash in accordance with the provisions of Parent’s
Charter Documents in respect of Parent Stockholder Redemptions; (B) for income tax or other tax obligations of Parent prior to Closing; (C)
for any Parent Transaction Costs and any Company Transaction Costs; and (D) as repayment of loans and reimbursement of expenses to
directors, officers and stockholders of Parent; and (b) thereafter, the Trust Account shall terminate, except as otherwise provided therein.
Section 7.13 Directors’ and Officers’ Liability Insurance.
(a) Parent agrees that all rights to exculpation, indemnification and advancement of expenses now existing in favor of the current or
former directors or officers, as the case may be, of any Group Company (each, together with such person’s heirs, executors or
administrators, a “D&O Indemnified Party”), as provided in their respective Charter Documents or in any indemnification agreement with
respect to any Group Company set forth on Schedule 7.12(a) of the Company Disclosure Letter shall survive the Closing and shall continue
in full force and effect. For a period of six (6) years from the Closing Date, Parent shall use reasonable best efforts to cause the Group
Companies to maintain in effect the exculpation, indemnification and advancement of expenses provisions of such Group Company’s Charter
Documents or in any indemnification agreements of each Group Company as in effect immediately prior to the Closing Date with any D&O
Indemnified Party, and Parent shall, and shall use reasonable best efforts to cause the Group Companies to, not amend, repeal or otherwise
modify any such provisions in any manner that would adversely affect the rights thereunder of any D&O Indemnified Party; provided,
however, that all rights to indemnification or advancement of expenses in respect of any Legal Proceedings pending or asserted or any claim
made within such six (6)-year period shall continue until the disposition of such Legal Proceeding or resolution of such claim.
(b) Prior to the Closing, the Company shall use reasonable best efforts to purchase a “tail” or “runoff” directors’ and officers’ liability
insurance policy (the “D&O Tail”) in respect of acts or omissions occurring prior to the Effective Time covering each such Person that is a
director or officer of a Group Company currently covered by a directors’ and officers’ liability insurance policy of one or more Group
Companies on terms with respect to coverage, deductibles and amounts no less favorable than those of such policy in effect on the date of
this Agreement and covering claims for the six-year period following the Closing. Parent shall, and shall use reasonable best efforts to cause
the Surviving Corporation to, maintain the D&O Tail in full force and effect for its full term and cause all obligations thereunder to be honored
by the Group Companies, as applicable, and no other party shall have any further obligation to purchase or pay for such insurance pursuant
to this Section 7.13(b).
(c) The rights of each D&O Indemnified Party hereunder shall be in addition to, and not in limitation of, any other rights such person
may have under the Charter Documents of any Group Company, any other indemnification arrangement, any Legal Requirement or
otherwise. The obligations of Parent and the Group Companies under this Section 7.13 shall not be terminated or modified in such a manner
as to adversely affect any D&O Indemnified Party without the consent of such D&O Indemnified Party. The provisions of this Section 7.13
shall survive the Closing and expressly are intended to benefit, and are enforceable by,
each of the D&O Indemnified Parties, each of whom is an intended third-party beneficiary of this Section 7.13.
(d) If Parent or, after the Closing, any Group Company, or any of their respective successors or assigns: (i) consolidates with or
merges into any other Person and shall not be the continuing or surviving entity of such consolidation or merger; or (ii) transfers or conveys
all or substantially all of its properties and assets to any Person, then, in each such case, Parent shall, and shall use reasonable best efforts
to cause the Group Companies to, make reasonable efforts to ensure that proper provision is made to have the successors and assigns of
Parent or such Group Company, as applicable, assume the obligations set forth in this Section 7.13.
(e) On or before the Closing, Parent shall obtain a directors’ and officers’ liability insurance policy on terms satisfactory to the
Company, which policy shall provide coverage for the directors and officers of Parent as of immediately following the Closing (and the
Company and Parent shall reasonably cooperate with respect thereto).
Section 7.14 Tax Matters.
(a) Parent covenants that it will file a consolidated U.S. federal income Tax Return with the applicable Group Companies for the period
starting on the day following the Closing Date and, for U.S. federal income Tax purposes, the applicable Group Companies will become
members of the affiliated group of corporations of which Parent is the common parent or of which Parent is a member on the day following
the Closing Date.
(b) All transfer, documentary, sales, use, stamp, registration, excise, recording, registration value added and other such similar Taxes
and fees (including any penalties and interest) that become payable in connection with or by reason of the execution of this Agreement and
the Transactions shall be borne and paid by the Parent. Parent shall timely file any Tax Return or other document with respect to such Taxes
or fees (and the Company and Parent shall reasonably cooperate with respect thereto as necessary).
(c) On the Closing Date, the Company shall provide Parent with a certificate on behalf of the Company, prepared in a manner
consistent and in accordance with the requirements of Treasury Regulation Sections 1.897-2(g), (h) and 1.1445-2(c)(3), certifying that no
interest in the Company is, or has been during the relevant period specified in Section 897(c)(1)(A)(ii) of the Code, a “U.S. real property
interest” within the meaning of Section 897(c) of the Code, and a form of notice to the Internal Revenue Service prepared in accordance with
the provisions of Treasury Regulations Section 1.897-2(h)(2); provided, that, notwithstanding anything to the contrary, Parent’s sole remedy
in the event the Company fails to deliver such certificate shall be to make a proper withholding of Tax to the extent required by applicable Tax
law.
(d) All Tax sharing agreements or similar arrangements with respect to or involving any Group Company (other than any agreement
entered into in the ordinary course of business and not primarily concerning Taxes or any agreement the only parties to which are Group
Companies) shall be terminated prior to the Closing Date and, after the Closing Date, none of the Group Companies shall be bound thereby
or have any liability thereunder for amounts due in respect of periods ending on or before the Closing Date, and there shall be no continuing
obligation after the Closing Date to make any payments under any such agreements or arrangements.
Section 7.15 Equity Financing Agreements.
(a) Parent shall not permit any amendment or modification to be made to, or any waiver of any provision or remedy under, or any
replacements of, the Equity Financing Agreements, in each case, without the prior written consent of the Company (such consent not to be
unreasonably withheld, conditioned or delayed in respect of any such amendment, modification, waiver or replacement that is not and would
not reasonably be expected to be materially adverse to the Company or the Company Stockholders). Parent shall take, or use its reasonable
best efforts to cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable to consummate the
transactions contemplated by the Equity Financing Agreements on the terms and conditions described therein, including maintaining in effect
the Equity Financing Agreements and using its reasonable best efforts to: (i) satisfy in all material respects on a timely basis all conditions
and covenants applicable to Parent in the Equity Financing Agreements and
otherwise comply with its obligations thereunder; (ii) in the event that all conditions in the Equity Financing Agreements (other than conditions
that Parent or any of its Affiliates control the satisfaction of and other than those conditions that by their nature are to be satisfied at the
Closing) have been satisfied, consummate transactions contemplated by the Equity Financing Agreements at or prior to Closing; and (iii)
enforce its rights under the Equity Financing Agreements in the event that all conditions in the Equity Financing Agreements (other than
conditions that Parent or any of its Affiliates control the satisfaction of and other than those conditions that by their nature are to be satisfied
at the Closing) have been satisfied, to cause the applicable Equity Financing Investor to contribute to Parent the applicable portion of the
Equity Financing Amount set forth in the applicable Equity Financing Agreement at or prior to the Closing. Without limiting the generality of
the foregoing, Parent shall give the Company prompt (and, in any event within three (3) Business Days) written notice: (A) of any breach or
default (or any event or circumstance that, with or without notice, lapse of time or both, could give rise to any breach or default) by any party
to any Equity Financing Agreement known to Parent; (B) of the receipt of any written notice or other written communication from any party to
any Equity Financing Agreement with respect to any actual, potential or claimed expiration, lapse, withdrawal, breach, default, termination or
repudiation by any party to any Equity Financing Agreement or any provisions of any Equity Financing Agreement; and (C) if Parent does not
expect to receive all or any portion of the Equity Financing Amount on the terms, in the manner or from the sources contemplated by the
Equity Financing Agreements. The Equity Financing Agreements contain all of the conditions precedent to the obligations of the Equity
Financing Investors to contribute to Parent the applicable portion of the Equity Financing Amount set forth in the applicable Equity Financing
Agreement on the terms therein.
(b) Parent shall use its reasonable best efforts to cause the Equity Financing Investors to contribute the Equity Financing Amount at or
prior to the Closing if all conditions set forth in the applicable Equity Financing Agreement have been satisfied or waived (other than those
conditions that by their nature are to be satisfied at the Closing and other than conditions that Parent or any of its Affiliates control the
satisfaction of). Parent shall use its reasonable best efforts to take, or cause to be taken, all actions required to obtain the Equity Financing
Amount contemplated by the Equity Financing Agreements, including enforcing the rights of Parent under the Equity Financing Agreements.
Section 7.16 Section 16 Matters. Prior to the Effective Time, Parent shall take all reasonable steps as may be required or permitted to
cause any acquisition or disposition of the Parent Class A Stock that occurs or is deemed to occur by reason of or pursuant to the
Transactions by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to
Parent to be exempt under Rule 16b-3 promulgated under the Exchange Act, including by taking steps in accordance with the No-Action
Letter, dated January 12, 1999, issued by the SEC regarding such matters.
Section 7.17 Board of Directors.
(a) Subject to the terms of the Parent’s Charter Documents, Parent shall take all such action within its power as may be necessary or
appropriate such that immediately following the Effective Time:
(i) the board of directors of Parent shall consist of up to twelve (12) directors, which shall initially include: (A) Alexis Borisy,
Krishna Yeshwant, Paul Berns, Jorge Conde, Eli Casdin, Sandra Horning, Clive Meanwell, Kathryn Giusti and Melanie Nallicheri, as
designees of the Company; (B) Sam Merksamer, as a designee of Softbank, or in the case of the foregoing clauses (A) and (B), if any
such individual is unavailable to serve, then an alternative individual may be designated in writing by the Company or Softbank, as
applicable, and subject to the approval of the board of directors of the Company (which such approval shall not be unreasonably
withheld, delayed or conditioned); and (C) the remaining director nominees, if any, shall be mutually agreed upon between the chief
executive officer of Parent and the chief executive officer of the Company; and
(ii) the board of directors of Parent shall have a majority of “independent” directors for the purposes of Nasdaq rules, each of
whom shall serve in such capacity in accordance with the terms of the Parent’s Organizational Documents following the Effective Time.
(b) On the Closing Date, Parent shall enter into customary indemnification agreements reasonably satisfactory to the Company with
each individual to be appointed to, or serving on, the board of directors of
Parent upon the Closing, which indemnification agreements shall continue to be effective following the Closing (the “Indemnification
Agreements”).
Section 7.18 LTIP and ESPP. Effective as of (and contingent on) the Closing, Parent shall adopt (a) the LTIP, in substantially the form
attached hereto as Exhibit B (as such form may be modified in accordance with this Section 7.18) and (b) the ESPP, in substantially the form
attached hereto as Exhibit C (as such form may be modified in accordance with this Section 7.18). The Company may propose further edits
to the LTIP and the ESPP based on recommendations from the Company’s compensation consultant and the board of directors of the
Company, which, after consideration and approval by Parent, not to be unreasonably withheld or delayed, shall be incorporated into the LTIP
and the ESPP in advance of the Special Meeting.
Section 7.19 Release.
(a) Effective upon and following the Closing, Parent, on its own behalf and on behalf of its respective Affiliates and Representatives,
generally, irrevocably, unconditionally and completely releases and forever discharges the Company, each Company Stockholder, its
Affiliates, and its and their respective Related Parties, (collectively, the “Company Stockholder Released Parties”) from all disputes, claims,
losses, controversies, demands, rights, liabilities, actions and causes of action of every kind and nature, whether known or unknown, arising
from any matter concerning any Group Company occurring prior to the Closing Date (other than as contemplated by this Agreement and the
other Transaction Agreements), including for controlling equityholder liability or breach of any fiduciary duty relating to any pre-Closing
actions or failures to act by the Company Stockholder Released Parties; provided, however, that nothing in this Section 7.19(a) shall release
any Company Stockholder Released Parties from (i) their obligations under this Agreement or the other Transaction Agreements; (ii) as
applicable, any disputes, claims, losses, controversies, demands, rights, liabilities, breaches of fiduciary duty, actions and causes of action
arising out of such Company Stockholder Released Party’s employment by any Group Company; (iii) any commercial Contract between the
Company and a Company Stockholder Released Party that is in force as of the Closing Date or (iv) from any claim of fraud on the part of any
Company Stockholder Released Party.
(b) Effective upon and following the Closing, each Company Stockholder (solely in its capacity as a stockholder of the Company), on
its own behalf and on behalf of each of its Affiliates and Representatives (collectively, the “Company Stockholder Releasing Parties”),
generally, irrevocably, unconditionally and completely releases and forever discharges each of Parent and each Group Company, their
respective Affiliates, and its and their respective Related Parties (collectively, the “Parent Released Parties”) from all disputes, claims, losses,
controversies, demands, rights, liabilities, actions and causes of action of every kind and nature, whether known or unknown, arising from (i)
the Company Stockholder Releasing Party’s ownership or purported ownership of (or right to acquire) shares of capital stock, warrants,
options or other securities of or interests in the Company or relating to the governance of the Company, including any and all claims that the
Company Stockholder Releasing Party may have against any of the Parent Released Parties with respect thereto whether pursuant to any
contract or agreement with respect thereto, breach or alleged breach of fiduciary duty or otherwise and (ii) the negotiation or execution of this
Agreement or the other Transaction Agreement, or the consummation of any of the Transactions; provided, however, that, for the avoidance
of doubt, nothing in this Section 7.19(b) shall release the Parent Released Parties from their obligations or otherwise modify, waive, replace,
supersede, or impair in any way any rights of any Company Stockholder Releasing Party (A) under this Agreement or the other Transaction
Agreements, including the right to receive its respective portion of the Total Consideration, (B) with respect to any salary, bonuses, vacation
pay or employee benefits accrued pursuant to a Company Benefit Plan in effect as of the date of this Agreement or any expense
reimbursement pursuant to a policy of the Group Companies in effect as of the date of this Agreement accrued in the ordinary course of
business; or (C) under any Contract between the Company Stockholder and a Parent Released Party to the extent that such Contract does
not specifically pertain to such Company Stockholder’s ownership or purported ownership of (or right to acquire) shares of capital stock,
warrants, options or other securities of or interests in the Company or specifically relate to the governance of the Company; (D) with respect
to any rights to indemnification, exculpation or expense reimbursement to the extent provided for in the Company Organizational Documents
or in any
indemnification agreement with a Group Company; or (E) from any claim of fraud on the part of any Parent Released Party.
ARTICLE VIII
CONDITIONS TO THE TRANSACTION
Section 8.1 Conditions to Obligations of Each Party’s Obligations. The respective obligations of each Party to this Agreement to effect
the Merger and the other Transactions shall be subject to the satisfaction at or prior to the Closing of the following conditions:
(a) Each Parent Stockholder Matter shall have been duly adopted by the stockholders of Parent.
(b) Parent shall have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(i) of the Exchange
Act) following the exercise by the holders of Parent Class A Stock issued in Parent’s initial public offering of securities and outstanding
immediately before the Closing of their right to convert their Parent Class A Stock held by them into a pro rata share of the Trust Account in
accordance with Parent’s Organizational Documents.
(c) All applicable waiting periods (and any extensions thereof) under the HSR Act will have expired or otherwise been terminated, and
the Parties will have received or have been deemed to have received all other necessary pre-closing authorizations, consents, clearances,
waivers and approvals of all Governmental Entities in connection with the execution, delivery and performance of this Agreement and the
Transactions set forth on Schedule 8.1(c) of the Company Disclosure Letter.
(d) No provision of any Applicable Legal Requirement prohibiting, enjoining or making illegal the consummation of the Transactions
shall be in effect and no temporary, preliminary or permanent restraining Order prohibiting, enjoining or making illegal the consummation of
the Transactions will be in effect.
(e) The Parent A&R Charter shall have been approved at the Special Meeting by the affirmative vote of the holders of a majority of the
shares of Parent Class A Stock then outstanding and entitled to vote thereon at the Special Meeting, voting separately as a single series.
Section 8.2 Additional Conditions to Obligations of the Company. The obligations of the Company to consummate and effect the
Merger and the other Transactions shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of
which may be waived, in writing, exclusively by the Company:
(a) The Fundamental Representations of Parent, other than Section 5.3, shall be true and correct in all material respects (without
giving effect to any limitation as to “materiality” or “Parent Material Adverse Effect” or any similar limitation contain herein) on and as of the
date of this Agreement and on and as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such
representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct
as of such earlier date); the representations and warranties of Parent set forth in Section 5.3 shall be true and correct in all respects on and
as of the date of this Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the extent that any
such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and
correct as of such earlier date), except for any de minimis inaccuracies; and all other representations and warranties of Parent set forth in
Article V hereof shall be true and correct (without giving effect to any limitation as to “materiality” or “Parent Material Adverse Effect” or any
similar limitation contained herein) on and as of the date of this Agreement and on as of the Closing Date as though made on and as of the
Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date), except where the failure of such representations and
warranties of Parent to be so true and correct, individually or in the aggregate, has not had and is not reasonably likely to have a Parent
Material Adverse Effect.
(b) Parent and Merger Sub shall have performed or complied with all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date, in each case in all material respects.
(c) Parent shall have delivered to the Company a certificate, signed by an executive officer of Parent and dated as of the Closing Date,
certifying as to the matters set forth in Section 8.2(a) and Section 8.2(b).
(d) Parent shall have delivered or shall stand ready to deliver all of the certificates, instruments, Contracts and other documents
specified to be delivered by it hereunder, including copies of the documents to be delivered by Parent pursuant to Section 1.2 and Section
1.3(a), duly executed by Parent and Merger Sub, as applicable.
(e) Parent shall have made appropriate arrangements to have the Trust Account, less amounts paid and to be paid pursuant to Section
7.12, available to Parent for payment of the Company Transaction Costs and the Parent Transaction Costs at the Closing.
(f) The shares of Parent Class A Stock to be issued in connection with the Merger shall have been approved for listing on the Nasdaq.
(g) No Parent Material Adverse Effect shall have occurred since the date of this Agreement and be continuing.
(h) The funds (i) contained in the Trust Account, plus (ii) the Equity Financing Amount to be received substantially concurrently with the
Closing, minus (iii) payment of the aggregate amount of cash proceeds required to satisfy any exercise of the Parent Stockholder
Redemptions (for the avoidance of doubt, in the case of the foregoing clauses, prior to giving effect to the payment of any Parent Transaction
Costs and any Company Transaction Costs), shall equal or exceed the Company’s Required Funds.
Section 8.3 Additional Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to
consummate and effect the Merger and the other Transactions shall be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, exclusively by Parent:
(a) The Fundamental Representations of the Company, other than Section 4.3, shall be true and correct in all material respects
(without giving effect to any limitation as to “materiality” or “Company Material Adverse Effect” or any similar limitation contain herein) on and
as of the date of this Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the extent that any
such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and
correct as of such earlier date); the representations and warranties of the Company set forth in Section 4.3 shall be true and correct in all
respects on and as of the date of this Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the
extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty
shall be true and correct as of such earlier date), except for any de minimis inaccuracies; and all other representations and warranties of the
Company set forth in Article IV hereof shall be true and correct (without giving effect to any limitation as to “materiality” or “Company Material
Adverse Effect” or any similar limitation contained herein) on and as of the date of this Agreement and on as of the Closing Date as though
made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date,
in which case such representation and warranty shall be true and correct as of such earlier date), except where the failure of such
representations and warranties of the Company to be so true and correct, individually or in the aggregate, has not had and is not reasonably
likely to have a Company Material Adverse Effect.
(b) The Company shall have performed or complied with all agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date, in each case in all material respects.
(c) The Company shall have delivered to Parent a certificate, signed by an executive officer of the Company and dated as of the
Closing Date, certifying as to the matters set forth in Section 8.3(a) and Section 8.3(b).
(d) The Company Stockholder Approval shall have been obtained.
(e) No Company Material Adverse Effect shall have occurred since the date of this Agreement and be continuing.
(f) The Company shall have delivered, or caused to be delivered, or shall stand ready to deliver all of the certificates, instruments,
Contracts and other documents specified to be delivered by it hereunder, including copies of the documents to be delivered by the Company
pursuant to Section 1.3(b), duly executed by the applicable signatory or signatories specified in Section 1.3(b), if any.
Section 9.1 Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Parent and the Company at any time;
ARTICLE IX
TERMINATION
(b) by either Parent or the Company if the Transactions shall not have been consummated by March 31, 2022 (the “Outside Date”);
provided, however, that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any Party whose action or
failure to act has been a principal cause of or resulted in the failure of the Transactions to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;
(c) by either Parent or the Company if a Governmental Entity shall have issued an Order or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the Transactions, including the Merger, which Order or other action is
final and nonappealable;
(d) by the Company, upon a breach of any representation, warranty, covenant or agreement set forth in this Agreement on the part of
Parent or Merger Sub, or if any representation or warranty of Parent or Merger Sub shall have become untrue, in either case such that the
conditions set forth in Article VIII would not be satisfied as of the time of such breach or as of the time such representation or warranty shall
have become untrue; provided, that if such breach by Parent or Merger Sub is curable by Parent or Merger Sub prior to the Closing, then the
Company must first provide written notice of such breach and may not terminate this Agreement under this Section 9.1(d) until the earlier of:
(i) 30 days after delivery of written notice from the Company to Parent of such breach; and (ii) the Outside Date; provided, further, that each
of Parent and Merger Sub continues to exercise commercially reasonable efforts to cure such breach (it being understood that the Company
may not terminate this Agreement pursuant to this Section 9.1(d) if: (A) it shall have materially breached this Agreement and such breach has
not been cured; or (B) if such breach by Parent or Merger Sub is cured during such 30-day period);
(e) by Parent, upon a breach of any representation, warranty, covenant or agreement set forth in this Agreement on the part of the
Company or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth in
Article VIII would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue;
provided, that if such breach is curable by the Company prior to the Closing, then Parent must first provide written notice of such breach and
may not terminate this Agreement under this Section 9.1(e) until the earlier of: (i) 30 days after delivery of written notice from Parent to the
Company of such breach; and (ii) the Outside Date; provided, further, that the Company continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Parent may not terminate this Agreement pursuant to this Section 9.1(e) if: (A) it shall
have materially breached this Agreement and such breach has not been cured; or (B) if such breach by the Company is cured during such
30-day period);
(f) by either Parent or the Company, if, at the Special Meeting (including any adjournments thereof), the Parent Stockholder Matters
are not duly adopted by the stockholders of Parent by the requisite vote under the DGCL and the Parent Organizational Documents;
(g) by either Parent or the Company, if the Parent Stockholder Redemption results in the condition set forth in Section 8.2(h) becoming
incapable of being satisfied at the Closing; or
(h) by Parent within twenty-four hours of the Company Stockholder Approval Deadline if the executed Stockholder Voting and Support
Agreements shall not have been delivered by the Company Stockholder Approval Deadline.
Section 9.2 Notice of Termination; Effect of Termination.
(a) Any termination of this Agreement under Section 9.1 above will be effective immediately upon the delivery of written notice of the
terminating Party to the other Parties.
(b) In the event of the termination of this Agreement as provided in Section 9.1, this Agreement shall be of no further force or effect and
the Transactions shall be abandoned, except for and subject to the following: (i) Section 7.5, Section 7.8, this Section 9.2, Article XI and the
Confidentiality Agreement shall survive the termination of this Agreement; and (ii) nothing herein shall relieve any Party from liability for any
willful and intentional breach of this Agreement or intentional fraud in the making of the representations and warranties in this Agreement.
ARTICLE X
NO SURVIVAL
Section 10.1 No Survival. None of the representations, warranties, covenants or agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing and all rights, claims and causes of action (whether in contract or in tort or
otherwise, or whether at law or in equity) with respect thereto shall terminate at the Closing. Notwithstanding the foregoing, neither this
Section 10.1 nor anything else in this Agreement to the contrary shall limit: (a) the survival of any covenant or agreement of the Parties which
by its terms is required to be performed or complied with in whole or in part after the Closing, which covenants and agreements shall survive
the Closing in accordance with their respective terms; or (b) any claim against the Company with respect to intentional fraud in the making of
the representations and warranties by the Company in Article IV or any claim against Parent with respect to intentional fraud in the making of
the representations and warranties by Parent in Article V, as applicable. For the avoidance of doubt, for purposes of this Agreement, “fraud”
does not include any claim for equitable fraud, promissory fraud or any torts (including a claim for fraud or alleged fraud) based on
negligence.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given: (a) on the date
established by the sender as having been delivered personally; (b) one Business Day after being sent by a nationally recognized overnight
courier guaranteeing overnight delivery; (c) on the date delivered, if delivered by email, with confirmation of transmission; or (d) on the fifth
Business Day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be
valid, must be addressed as follows:
if to Parent or Merger Sub, to:
CM Life Sciences III Inc.
667 Madison Avenue
New York, NY 10065
Attention: Keith Meister
E-mail: kmeister@corvexcap.com
with a copy (which shall not constitute notice) to:
White & Case LLP
1221 Avenue of the Americas
New York, NY 10020-1095
Attention: Matthew Kautz; Joel Rubinstein
Email: mkautz@whitecase.com; joel.rubinstein@whitecase.com
if to the Company, prior to the Closing, to:
EQRx, Inc.
50 Hampshire Street
Cambridge, MA 02139
Attention: Jami Rubin
Email: jrubin@eqrx.com
with a copy (which shall not constitute notice) to:
Goodwin Procter LLP
100 Northern Avenue
Boston, Massachusetts 02210
Attention: William Collins
Email: wcollins@goodwinlaw.com
or to such other address or to the attention of such Person or Persons as the recipient Party has specified by prior written notice to the
sending Party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If
more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.
Section 11.2 Interpretation. The words “hereof,” “herein,” “hereinafter,” “hereunder,” and “hereto” and words of similar import refer to
this Agreement as a whole and not to any particular section or subsection of this Agreement and reference to a particular section of this
Agreement will include all subsections thereof, unless, in each case, the context otherwise requires. The definitions of the terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever the context shall require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. When a reference is made in this Agreement to an Exhibit, such reference shall be to
an Exhibit to this Agreement unless otherwise indicated. When a reference is made in this Agreement to Sections or subsections, such
reference shall be to a Section or subsection of this Agreement. Unless otherwise indicated the words “include,” “includes” and “including”
when used herein shall be deemed in each case to be followed by the words “without limitation.” The words “made available” mean that the
subject documents or other materials were included in and available at the “Project Clover” online datasite hosted by “Datasite” prior to the
date of this Agreement. The words “ordinary course” shall be deemed to include “consistent with past practice.” The table of contents and
headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to “the business of” an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity. The word “or” shall be disjunctive but not exclusive. When calculating the period of time before which, within which
or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such
period shall be excluded and if the last day of such period is a non-Business Day, the period in question shall end on the next succeeding
Business Day. References to a particular statute or regulation including all rules and regulations thereunder and any predecessor or
successor statute, rule, or regulation, in each case as amended or otherwise modified from time to time. All references to currency amounts
in this Agreement shall mean United States dollars.
Section 11.3 Counterparts; Electronic Delivery. This Agreement, the Transaction Agreements and each other document executed in
connection with the Transactions, and the consummation thereof, may be executed in one or more counterparts, all of which shall be
considered one and the same document and shall become effective when one or more counterparts have been signed by each of the Parties
and delivered to the other Parties, it being understood that all Parties need not sign the same counterpart. Delivery by electronic transmission
to counsel for the other Parties of a counterpart executed by a Party shall be deemed to meet the requirements of the previous sentence.
Section 11.4 Entire Agreement; Third Party Beneficiaries. This Agreement, the other Transaction Agreements and any other
documents and instruments and agreements among the Parties as contemplated by or referred to herein, including the Exhibits and
Schedules hereto: (a) constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof; and
(b) other than the rights, at and after the Effective Time, of Persons pursuant to the provisions of Section 7.4(b), Section 7.13 and Section
11.14 (which will be for the benefit of the Persons set forth therein), are not intended to confer upon any other Person other than the Parties
any rights or remedies.
Section 11.5 Severability. In the event that any term, provision, covenant or restriction of this Agreement, or the application thereof, is
held to be illegal, invalid or unenforceable under any present or future Legal Requirement: (a) such provision will be fully severable; (b) this
Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; (c) the
remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom; and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as
a part of this Agreement a legal, valid and enforceable provision as similar in terms of such illegal, invalid or unenforceable provision as may
be possible.
Section 11.6 Other Remedies; Specific Performance. Except as otherwise provided herein, prior to the Closing, any and all remedies
herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law
or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. The Parties
agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that each Party shall be entitled to enforce specifically the terms and
provisions of this Agreement in any court of the United States or any state having jurisdiction and immediate injunctive relief to prevent
breaches of this Agreement, without the necessity of proving the inadequacy of money damages as a remedy and without bond or other
security being required, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties hereby
acknowledges and agrees that it may be difficult to prove damages with reasonable certainty, that it may be difficult to procure suitable
substitute performance, and that injunctive relief and/or specific performance will not cause an undue hardship to the Parties. Each of the
Parties hereby further acknowledges that the existence of any other remedy contemplated by this Agreement does not diminish the
availability of specific performance of the obligations hereunder or any other injunctive relief. Each Party hereby further agrees that in the
event of any action by any other party for specific performance or injunctive relief, it will not assert that a remedy at law or other remedy
would be adequate or that specific performance or injunctive relief in respect of such breach or violation should not be available on the
grounds that money damages are adequate or any other grounds.
Section 11.7 Governing Law. This Agreement and the consummation the Transactions, and any action, suit, dispute, controversy or
claim arising out of this Agreement and the consummation of the Transactions, or the validity, interpretation, breach or termination of this
Agreement and the consummation of the Transactions, shall be governed by and construed in accordance with the internal law of the State
of Delaware regardless of the law that might otherwise govern under applicable principles of conflicts of law thereof.
Section 11.8 Consent to Jurisdiction; Waiver of Jury Trial.
(a) Any proceeding based upon or arising out of this Agreement, the other Transaction Agreements and the consummation of the
Transactions must be brought in the Court of Chancery of the State of Delaware (or, to the extent such court does not have subject matter
jurisdiction, the Superior Court of the State of Delaware). Each of the Parties irrevocably consents to the exclusive jurisdiction and venue of
such courts, agrees that process may be served upon them in any manner authorized by the laws of the State of Delaware for such Person
and waives and covenants not to assert or plead any objection which they might otherwise have to such manner of service of process. Each
Party and any Person asserting rights as a third-party beneficiary may do so only if he, she or it hereby waives, and shall not assert as a
defense in any legal dispute, that: (i) such Person is not personally subject to the jurisdiction of the above named courts for any reason; (ii)
such Legal Proceeding may not be brought or is not maintainable in such court; (iii) such Person’s property is exempt or immune from
execution; (iv) such Legal Proceeding is brought in an inconvenient forum; or (v) the venue of such Legal Proceeding is improper. Each Party
and any Person asserting rights as a third-party beneficiary hereby agrees not to commence or prosecute any such action, claim, cause of
action or suit other than before one of the above-named courts, nor to make any motion or
take any other action seeking or intending to cause the transfer or removal of any such action, claim, cause of action or suit to any court
other than one of the above-named courts, whether on the grounds of inconvenient forum or otherwise. Each Party hereby consents to
service of process in any such proceeding in any manner permitted by Delaware law, and further consents to service of process by nationally
recognized overnight courier service guaranteeing overnight delivery, or by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 11.1. Notwithstanding the foregoing in this Section 11.8, any Party may commence any action, claim,
cause of action or suit in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of
the above-named courts.
(b) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LEGAL REQUIREMENTS WHICH CANNOT BE WAIVED, EACH OF THE
PARTIES AND ANY PERSON ASSERTING RIGHTS AS A THIRD-PARTY BENEFICIARY MAY DO SO ONLY IF HE, SHE OR IT
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIMS OR COUNTERCLAIMS
ASSERTED IN ANY LEGAL DISPUTE RELATING TO THIS AGREEMENT, EACH OTHER TRANSACTION AGREEMENTS AND THE
CONSUMMATION OF THE TRANSACTIONS, AND FOR ANY COUNTERCLAIM RELATING THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING. IF THE SUBJECT MATTER OF ANY SUCH LEGAL DISPUTE IS ONE IN WHICH THE WAIVER OF
JURY TRIAL IS PROHIBITED, NO PARTY NOR ANY PERSON ASSERTING RIGHTS AS A THIRD-PARTY BENEFICIARY SHALL ASSERT
IN SUCH LEGAL DISPUTE A NONCOMPULSORY COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER TRANSACTION AGREEMENTS AND THE CONSUMMATION OF THE TRANSACTIONS. FURTHERMORE, NO PARTY NOR ANY
PERSON ASSERTING RIGHTS AS A THIRD-PARTY BENEFICIARY SHALL SEEK TO CONSOLIDATE ANY SUCH LEGAL DISPUTE
WITH A SEPARATE ACTION OR OTHER LEGAL PROCEEDING IN WHICH A JURY TRIAL CANNOT BE WAIVED.
Section 11.9 Rules of Construction. Each of the Parties agrees that it has been represented by independent counsel of its choice
during the negotiation and execution of this Agreement and each Party hereto and its counsel cooperated in the drafting and preparation of
this Agreement and the documents referred to herein and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or
document.
Section 11.10 Expenses. Except as otherwise expressly provided in this Agreement, whether or not the Transactions are
consummated, each Party will pay its own costs and expenses incurred in anticipation of, relating to and in connection with the negotiation
and execution of this Agreement and the Transaction Agreements and the consummation of the Transactions.
Section 11.11 Assignment. No Party may assign, directly or indirectly, including by operation of law, either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval of the other Parties. Subject to the first sentence of this Section
11.11, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted
assigns.
Section 11.12 Amendment. This Agreement may be amended by the Parties at any time by execution of an instrument in writing
signed on behalf of each of the Parties; provided that, following the receipt of the Company Stockholder Approval, there shall be no
amendment to this Agreement (or any of the provisions hereof) which under the DGCL or other Applicable Legal Requirements would require
further approval by the stockholders of the Company in accordance with the Company Organizational Documents without such approval.
Section 11.13 Extension; Waiver. At any time prior to the Closing, Parent (on behalf of itself and Merger Sub), on the one hand, and
the Company (on behalf of itself and the Company Stockholders), on the other hand, may, to the extent not prohibited by Applicable Legal
Requirements: (a) extend the time for the performance of any of the obligations or other acts of the other Party; (b) waive any inaccuracies in
the representations and warranties made to the other Party contained herein or in any document delivered pursuant hereto; and (c) waive
compliance with any of the agreements or conditions for the benefit of such Party contained herein. Any agreement on the part of a Party to
any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such Party. Delay in exercising any right under this Agreement shall not
constitute a waiver of such right. In the event any provision of any of the other Transaction Agreement in any way conflicts with the provisions
of this Agreement (except where a provision therein expressly provides that it is intended to take precedence over this Agreement), this
Agreement shall control.
Section 11.14 No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement, this Agreement may only
be enforced against, and any Legal Proceeding for breach of this Agreement may only be made against, the entities that are expressly
identified herein as Parties to this Agreement, and no Related Party of a Party shall have any liability for any liabilities or obligations of the
Parties for any Legal Proceeding (whether in tort, contract or otherwise) for breach of this Agreement or in respect of any oral representations
made or alleged to be made in connection herewith. No Party shall have any right of recovery in respect hereof against any Related Party of
a Party and no personal liability shall attach to any Related Party of a Party through such Party, whether by or through attempted piercing of
the corporate veil, by the enforcement of any judgment, fine or penalty or by virtue of any Legal Requirement or otherwise. Without limiting
the generality of the foregoing, the Parties will not, and will not cause or permit any other Person to, hold or attempt to hold any Related Party
liable for any actual or alleged inaccuracies, misstatements or omissions with respect to any information or materials of any kind furnished by
the Company or any Related Party, or their respective agents or other Representatives, concerning a Group Company, this Agreement or the
Transactions. The provisions of this Section 11.14 are intended to be for the benefit of, and enforceable by the Related Parties of the Parties
and each such Person shall be a third-party beneficiary of this Section 11.14. This Section 11.14 shall be binding on all successors and
assigns of Parties.
Section 11.15 Legal Representation.
(a) Parent hereby agrees on behalf of its directors, members, partners, officers, employees and Affiliates (including after the Closing,
the Company), and each of their respective successors and assigns (all such parties, the “Parent Waiving Parties”), that Goodwin Procter
LLP (or any successor) may represent the Company Stockholders or any of their respective directors, members, partners, officers,
employees or Affiliates (other than the Company) (collectively, the “Stockholder Group”), in each case, in connection with any Legal
Proceeding or obligation arising out of or relating to this Agreement, any Transaction Agreement or the Transactions, notwithstanding its
representation (or any continued representation) of the Group Companies or other Parent Waiving Parties, and each of Parent and the
Company on behalf of itself and the Parent Waiving Parties hereby consents thereto and irrevocably waives (and will not assert) any conflict
of interest, breach of duty or any other objection arising therefrom or relating thereto. Parent and the Company acknowledge that the
foregoing provision applies whether or not Goodwin Procter LLP provides legal services to any Group Companies after the Closing Date.
Each of Parent and the Company, for itself and the Parent Waiving Parties, hereby further irrevocably acknowledges and agrees that all
communications, written or oral, between any Group Company or any member of the Stockholder Group and its counsel, including Goodwin
Procter LLP, made in connection with the negotiation, preparation, execution, delivery and performance under, or any dispute or Legal
Proceeding arising out of or relating to, this Agreement, any Transaction Agreements or the Transactions, or any matter relating to any of the
foregoing, are privileged communications that do not pass to the Company notwithstanding the Merger, and instead survive, remain with and
are controlled by the Stockholder Group (the “Stockholder Privileged Communications”), without any waiver thereof. Parent and the
Company, together with any of their respective Affiliates, Subsidiaries, successors or assigns, agree that no Person may use or rely on any of
the Stockholder Privileged Communications, whether located in the records or email server of the Company or otherwise (including in the
knowledge or the officers and employees of the Company), in any Legal Proceeding against or involving any of the Parties after the Closing,
and Parent and the Company agree not to assert that any privilege has been waived as to the Stockholder Privileged Communications,
whether located in the records or email server of the Company or otherwise (including in the knowledge of the officers and employees of the
Company).
(b) The Company hereby agrees on behalf of its directors, members, partners, officers, employees and Affiliates and the Company
Stockholders, and each of their respective successors and assigns (all such parties, the “Company Waiving Parties”), that White & Case LLP
(or any successor) may represent
the Sponsor, Parent or any of their respective directors, members, partners, officers, employees or Affiliates (other than the Company)
(collectively, the “Parent Group”), in each case, in connection with any Legal Proceeding or obligation arising out of or relating to this
Agreement, any Transaction Agreement or the Transactions, notwithstanding its representation (or any continued representation) of the
Parent Group, and the Company on behalf of itself and Company Waiving Parties hereby consents thereto and irrevocably waives (and will
not assert) any conflict of interest, breach of duty or any other objection arising therefrom or relating thereto. The Company acknowledges
that the foregoing provision applies whether or not White & Case LLP provides legal services to the Sponsor or Parent after the Closing Date.
The Company, for itself and the Company Waiving Parties, hereby further irrevocably acknowledges and agrees that all communications,
written or oral, between any of the Parent Group and its counsel, including White & Case LLP, made in connection with the negotiation,
preparation, execution, delivery and performance under, or any dispute or Legal Proceeding arising out of or relating to, this Agreement, any
Transaction Agreements or the Transactions, or any matter relating to any of the foregoing, are privileged communications that do not pass
to the Company notwithstanding the Merger, and instead survive, remain with and are controlled by the Sponsor and Parent (the “Parent
Privileged Communications”), without any waiver thereof. Sponsor and Parent, together with any of their respective Affiliates, Subsidiaries,
successors or assigns, agree that no Person may use or rely on any of the Stockholder Privileged Communications, whether located in the
records or email server of the Company or otherwise (including in the knowledge or the officers and employees of the Company), in any
Legal Proceeding against or involving any of the Parties after the Closing, and the Company Waiving Parties agree not to assert that any
privilege has been waived as to the Parent Privileged Communications.
Section 11.16 Disclosure Letters and Exhibits. The Company Disclosure Letter and Parent Disclosure Letter shall each be arranged in
separate parts corresponding to the numbered and lettered sections and subsections in this Agreement, and the information disclosed in any
numbered or lettered part shall be deemed to relate to and to qualify only the particular provision set forth in the corresponding numbered or
lettered Section or subsection of this Agreement, except to the extent that: (a) such information is cross-referenced in another part of the
Company Disclosure Letter or Parent Disclosure Letter, as applicable; or (b) it is reasonably apparent on the face of the disclosure (without
any independent knowledge on the part of the reader regarding the matter disclosed) that such information qualifies another provision in this
Agreement. The specification of any dollar amount in the representations and warranties contained in this Agreement or the inclusion of any
specific item in the Company Disclosure Letter and Parent Disclosure Letter is not intended to imply that such amounts (or higher or lower
amounts) are or are not material, and no Party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in
the Company Disclosure Letter or Parent Disclosure Letter in any dispute or controversy between the Parties as to whether any obligation,
item, or matter not described herein or included in Company Disclosure Letter or the Parent Disclosure Letter is or is not material for
purposes of this Agreement. The inclusion of any item in the Company Disclosure Letter or Parent Disclosure Letter shall not be deemed to
constitute an acknowledgment by the Company or Parent, as applicable, that the matter is required to be disclosed by the terms of this
Agreement, nor shall such disclosure be deemed (a) an admission of any breach or violation of any Contract or Legal Requirement, (b) an
admission of any liability or obligation to any third party, or (c) to establish a standard of materiality. The disclosure of any items or information
that is not required by this Agreement to be so included is solely for informational purposes and the convenience of Parent and Merger Sub
or the Company, as applicable. In addition, under no circumstances shall the disclosure of any matter in this Company Disclosure Letter or
Parent Disclosure Letter, where a representation or warranty of the Company or Parent, as applicable, is limited or qualified by the materiality
of the matters to which the representation or warranty is given or by Company Material Adverse Effect, imply that any other undisclosed
matter having a greater value or other significance is material or would have a Company Material Adverse Effect. Neither the Company nor
Parent shall be prejudiced in any manner whatsoever, and no presumptions shall be created, by virtue of the disclosure of any matter in the
Company Disclosure Letter or Parent Disclosure Letter, as applicable, which otherwise is not required to be disclosed by this Agreement.
[Signature Pages Follow]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above.
CM LIFE SCIENCES III INC.
By:
Name:
Title:
/s/ Brian Emes
Brian Emes
Chief Financial Officer and Secretary
CLOVER III MERGER SUB INC.
By:
Name:
Title:
/s/ Brian Emes
Brian Emes
Chief Financial Officer and Secretary
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above.
EQRX, INC.
By:
Name:
Title:
/s/ Melanie Nallicheri
Melanie Nallicheri
President and Chief Operating Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
Section 1.1. Defined Terms. Terms defined in this Agreement are organized alphabetically as follows, together with the Section and,
where applicable, paragraph, number in which definition of each such term is located:
SCHEDULE A
DEFINED TERMS
“A&R Registration Rights Agreement”
“Acceleration Event”
“Accelerated Vesting Date”
“Additional Parent SEC Reports”
“Affiliate”
“Agreement”
“Antitrust Laws”
“Approvals”
“Audited Financial Statements”
“Business Day”
“Certificate”
“Certificate of Merger”
“Certifications”
“Change in Recommendation”
“Change of Control”
“Charter Documents”
“Closing”
“Closing Consideration”
“Closing Date”
“Closing Form 8-K”
“Closing Merger Consideration”
“Closing Number of Securities”
“Closing Press Release”
“Code”
“Common Share Price”
“Company”
“Company Benefit Plan”
“Company Business Combination”
“Company Common Stock”
“Company Disclosure Letter”
“Company Material Adverse Effect”
“Company Organizational Documents”
“Company Material Contract”
“Company Preferred Stock”
“Company Series A Preferred Stock”
“Company Series B Preferred Stock”
“Company Stockholder”
“Company Stockholder Approval”
“Company Stockholder Approval Deadline”
“Company Stockholder Released Parties”
Recitals
Section 3.2
Section 3.2
Section 5.7(a)
Schedule A, Section 1.2
Preamble
Schedule A, Section 1.2
Section 4.6(b)
Section 4.8(a)
Schedule A, Section 1.2
Section 2.7(a)
Section 1.4(c)
Section 5.7(a)
Section 7.1(f)
Schedule A, Section 1.2
Section 4.1
Section 1.1
Section 2.8(a)
Section 1.1
Section 7.4(c)
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 7.4(c)
Schedule A, Section 1.2
Schedule A, Section 1.2
Preamble
Section 4.12(a)
Section 7.11(a)
Section 4.3(a)
Article IV, Preamble
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 4.20(a)
Section 4.3(a)
Section 4.3(a)
Section 4.3(a)
Schedule A, Section 1.2
Section 4.4
Recitals
Section 7.19(a)
“Company Stockholder Releasing Parties”
“Company Subsidiaries”
“Company’s Required Funds”
Section 7.19(b)
Section 4.2(a)
Schedule A, Section 1.2
“Company Transaction Costs”
“Company Waiving Parties”
“Confidentiality Agreement”
“Continental”
“Contract”
“Copyright”
“Current Government Contract”
“D&O Indemnified Party”
“D&O Tail”
“DGCL”
“Dissenting Shares”
“EAR”
“Earn-Out Award Agreement”
“Earn-Out Escrow Agreement”
“Earn-Out Period”
“Earn-Out Pro Rata Share”
“Earn-Out Shares”
“Effective Time”
“Environmental Law”
“ERISA”
“ERISA Affiliate”
“Equity Financing Agreement”
“Equity Financing Amount”
“Equity Financing Investors”
“Equity Exchange Ratio”
“ESPP”
“Exchange Act”
“Exchange Agent”
“Excluded Share”
“Financial Statements”
“Forfeiture Pool”
“Fundamental Representations”
“GAAP”
“Governmental Entity”
“Government Grants”
“Group Companies”
“Group Companies’ Privacy Notices”
“Hazardous Material”
“HSR Act”
“Indebtedness”
Schedule A, Section 1.2
Section 11.15(b)
Schedule A, Section 1.2
Section 5.14(a)
Schedule A, Section 1.2
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 7.13(a)
Section 7.13(b)
Recitals
Section 2.12(d)
Definition of Specified Business Conduct Laws
Section 3.4
Section 3.5(b)
Schedule A
Schedule A, Section 1.2
Section 3.1
Section 2.1
Schedule A, Section 1.2
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 5.13
Section 5.13
Section 5.13
Schedule A
Recitals
Schedule A, Section 1.2
Section 2.8(b)
Section 2.7(d)
Section 4.8(a)
Section 3.4
Schedule A, Section 1.2
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 4.25
Schedule A, Section 1.2
Section 4.19(a)
Schedule A, Section 1.2
Section 4.5(b)
Schedule A, Section 1.2
“Indemnification Agreement”
“Insider”
“Insurance Policies”
“Intended Tax Treatment”
“Intellectual Property”
“Interim Financial Statements”
“Knowledge”
“Leased Real Property”
“Legal Proceeding”
Section 7.17(b)
Section 4.22
Section 4.21
Recitals
Schedule A, Section 1.2
Section 4.8(a)
Schedule A, Section 1.2
Section 4.14(b)
Schedule A, Section 1.2
“Legal Requirements”
“Lien”
“Lock-Up Letter”
“LTIP”
“Material Current Government Contract”
“Merger”
“Merger Sub”
“Merger Sub Common Stock”
“Multiemployer Plan”
“Nasdaq”
“OFAC”
“Order”
“Outside Date”
“Parent”
“Parent A&R Charter”
“Parent Business Combination”
“Parent Cash”
“Parent Charter”
“Parent Class A Stock”
“Parent Class B Stock”
“Parent Disclosure Letter”
“Parent Financing Certificate”
“Parent Group”
“Parent Material Adverse Effect”
“Parent Material Contracts”
“Parent Option”
“Parent Organizational Documents”
“Parent Privileged Communications”
“Parent Q1 2021 Quarterly Report”
“Parent Recommendation”
“Parent Released Parties”
“Parent Restricted Stock Award”
“Parent SEC Reports”
“Parent Shares”
“Parent Stockholder Approval”
“Parent Stockholder Matters”
“Parent Stockholder Redemption”
“Parent Transaction Costs”
“Parent Units”
“Parent Waiving Parties”
Schedule A, Section 1.2
Schedule A, Section 1.2
Recitals
Recitals
Section 4.7
Recitals
Preamble
Section 5.3(b)
Section 4.12(e)
Section 5.12
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 9.1(b)
Preamble
Recitals
Section 7.11(b)
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 5.3(a)
Section 5.3(a)
Article V
Section 1.2
Section 11.15(b)
Schedule A, Section 1.2
Section 5.11
Section 2.12(a)
Schedule A, Section 1.2
Section 11.15(b)
Section 5.7(a)
Recitals
Section 7.19(b)
Section 2.12(b)
Section 5.7(a)
Section 5.3(a)
Schedule A, Section 1.2
Section 7.1(a)
Section 7.1(a)
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 11.15(a)
“Parent Warrants”
“Parties”
“Patent”
“PCAOB Financial Statements”
“Pension Plan”
“Permitted Lien”
“Person”
“Private Placement Warrants”
“Proxy Statement/Prospectus”
Section 5.3(a)
Preamble
Schedule A, Section 1.2
Section 7.1(e)
Section 4.12(e)
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 5.3(a)
Section 7.1(a)
“Public Warrants”
“Registration Statement Effective Date”
“Related Parties”
“Release Notice”
“Released Claims”
“Remedies Exception”
“Representatives”
“SEC”
“Securities Act”
“Softbank”
“Solicitation Documents”
“Special Meeting”
“Specified Business Conduct Laws”
“Sponsor”
“Sponsor Forfeiture Agreement”
“Stockholder Group”
“Stockholder Privileged Communications”
“Stockholder Voting and Support Agreement”
“Subsidiary”
“Surrender Documentation”
“Surviving Corporation”
“Tax Return”
“Tax/Taxes”
“Top Supplier”
“Total Consideration”
“Transaction Agreements”
“Transaction Litigation”
“Transactions”
“Trademarks”
“Trade Secrets”
“Treasury Regulations”
“Triggering Event I”
“Triggering Event II”
“Triggering Events”
“Triggering Event I Earn-Out Shares”
“Triggering Event II Earn-Out Shares”
“Trust Account”
“Trust Agreement”
“Trust Termination Letter”
“WARN”
Section 5.3(a)
Section 7.1(a)
Schedule A, Section 1.2
Section 3.5(c)
Section 7.8(a)
Section 4.4
Section 7.11(a)
Schedule A, Section 1.2
Schedule A, Section 1.2
Schedule A
Section 7.1(a)
Section 7.1(f)
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 1.2
Section 11.15(a)
Section 11.15(a)
Recitals
Schedule A, Section 1.2
Section 2.8(d)
Recitals
Schedule A, Section 1.2
Schedule A, Section 1.2
Section 4.27(b)
Section 2.6(a)
Schedule A, Section 1.2
Section 7.6(c)
Schedule A, Section 1.2
Schedule A, Section 1.2
Schedule A, Section 1.2
Schedule A, Section 1.2
Schedule A
Schedule A
Schedule A
Section 3.1
Section 3.1
Section 5.14(a)
Section 5.14(a)
Section 7.6
Section 4.13(e)
“Warrant Accounting Issue”
Schedule A
Section 1.2. Additional Terms. For purposes of this Agreement, the following capitalized terms have the following meanings:
“Affiliate” shall mean, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under direct or
indirect common control with, such Person. For purposes of this definition, “control” (including with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
“Aggregate Company Share Amount” shall mean the sum, without duplication, of (a) the aggregate number of shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective Time, (b) the aggregate number of shares of Company
Common Stock that are issuable upon the exercise of Company Options or other direct or indirect rights to acquire shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective Time, (c) the aggregate number of shares of Company
Common Stock that are underlying Company Restricted Stock Awards issued and outstanding immediately prior to the Effective Time, and
(d) the aggregate number of shares of Company Common Stock that would be issuable upon the conversion all shares of Company
Preferred Stock into shares of Company Common Stock pursuant to the Company Organizational Documents, in each case calculated on a
treasury stock basis.
“Antitrust Laws” shall mean the HSR Act and any federal, state or foreign law, regulation or decree designed to prohibit, restrict or
regulate actions for the purpose or effect of monopolization or restraint of trade or the significant impediment of effective competition,
including merger control procedures.
“Business Day” shall mean any day other than a Saturday, a Sunday or other day on which commercial banks in New York, New York
are authorized or required by Legal Requirements to close.
“Change of Control” shall mean any transaction or series of transactions the result of which is: (a) the acquisition by any Person or
“group” (as defined in the Exchange Act) of Persons of direct or indirect beneficial ownership of securities representing 50% or more of the
combined voting power of the then outstanding securities of Parent; (b) a merger, consolidation, reorganization or other business
combination, however effected, resulting in any Person or “group” (as defined in the Exchange Act) acquiring at least 50% of the combined
voting power of the then outstanding securities of Parent or the surviving Person outstanding immediately after such combination; or (c) a
sale of all or substantially all of the assets of Parent.
“Closing Merger Consideration” shall mean an amount equal to $3,650,000,000.
“Closing Number of Securities” shall mean the number of shares of Parent Class A Stock equal to the quotient of (a) the Closing
Merger Consideration divided by (b) $10.00.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Common Share Price” shall mean the share price equal to the closing sale price of one share of Parent Class A Stock as reported on
Nasdaq (or the exchange on which the shares of Parent Class A Stock are then listed) for a period of at least twenty (20) days out of thirty
(30) consecutive Trading Days ending on the Trading Day immediately prior to the date of determination (as adjusted as appropriate to reflect
any stock splits, reverse stock splits, stock dividends (including any dividend or distribution of securities convertible into Parent Class A
Stock), extraordinary cash dividend (which adjustment shall be subject to the reasonable mutual agreement of Parent and the Company),
reorganization, recapitalization, reclassification, combination, exchange of shares or other like change or transaction with respect to Parent
Class A Stock).
“Company Incentive Plan” shall mean that certain 2019 Stock Option and Grant Plan of the Company.
“Company IT Systems” shall mean all computer systems, software, firmware, hardware, networks, interfaces, platforms, related
systems, databases, websites and equipment owned, outsourced or licensed by any Group Company to process, store, maintain, backup or
operate data, information and functions that are used in connection with the business of the Group Companies, but excluding, for the
avoidance of doubt, any computer systems, software, firmware, hardware, networks, interfaces, platforms, related systems, databases,
websites and equipment owned, outsourced or licensed by customers of any Group Company.
“Company Material Adverse Effect” shall mean any change, event, or occurrence, that, individually or when aggregated with other
changes, events, or occurrences has had a materially adverse effect on the business, assets, financial condition or results of operations of
the Group Companies, taken as a whole; provided, however, that no change, event, occurrence or effect arising out of or related to any of the
following, alone or in combination, shall be taken into account in determining whether a Company Material Adverse Effect has occurred: (i)
acts of war, sabotage, civil unrest or terrorism, or any escalation or worsening of any such acts of war, sabotage, civil unrest or terrorism, or
changes in global, national, regional, state or local political or social conditions; (ii) earthquakes, hurricanes, tornados, pandemics (including
COVID-19), epidemics, disease outbreaks, or public health emergencies (as declared by the World Health Organization or the Health and
Human Services Secretary of the United States) or other natural or man-made disasters, or any worsening thereof; (iii) changes attributable
to the public announcement or pendency of the Transactions (including the impact thereof on relationships with customers, suppliers,
employees or Governmental Entities); (iv) changes or proposed changes in Applicable Legal Requirements, regulations or interpretations
thereof or decisions by courts or any Governmental Entity after the date of this Agreement (including Pandemic Measures); (v) changes or
proposed changes in GAAP (or any interpretation thereof) after the date of this Agreement; (vi) any downturn in general economic conditions,
including changes in the credit, debt, securities, financial, capital or reinsurance markets (including changes in interest or exchange rates,
prices of any security or market index or commodity or any disruption of such markets), in each case, in the United States or anywhere else
in the world; (vii) events or conditions generally affecting the industries and markets in which the Company operates; (viii) any failure to meet
any projections, forecasts, guidance, estimates, milestones, budgets or financial or operating predictions of revenue, earnings, cash flow or
cash position, provided that this clause (viii) shall not prevent a determination that any change, event, or occurrence underlying such failure
has resulted in a Company Material Adverse Effect; or (ix) any actions required to be taken, or required not to be taken, pursuant to the terms
of this Agreement; provided, however, that if a change or effect related to clauses (iv) through (vii) disproportionately adversely affects the
Group Companies, taken as a whole, compared to other Persons operating in the same industry as the Group Companies, then such
disproportionate impact may be taken into account in determining whether a Company Material Adverse Effect has occurred.
“Company Option” shall mean an option to purchase shares of Company Common Stock granted under the Company Incentive Plan
or otherwise.
“Company Organizational Documents” shall mean that certain (i) Amended and Restated Investors’ Rights Agreement, by and among
the Company and the investors listed on Schedule A thereto, dated as of November 2, 2020, as amended by an Amendment No. 1 to
Amended and Restated Investors’ Rights Agreement, dated as of November 18, 2020, (ii) Amended and Restated Voting Agreement, by and
among the Company and the investors listed on Schedule A and the key holders listed on Schedule B thereto, dated as of November 2,
2020, as amended by an Amendment No. 1 to Amended and Restated Voting Agreement, dated as of November 18, 2020, (iii) Amended
and Restated Right of First Refusal and Co-Sale Agreement, by and among the investors listed on Schedule A and the key holders listed on
Schedule B thereto, dated as of November 2, 2020, as amended as amended by an Amendment No. 1 to Amended and Restated Right of
First Refusal and Co-Sale Agreement, dated as of November 18, 2020, and (iv) Third Amended and Restated Certificate of Incorporation of
the Company filed with the Delaware Secretary of Stated on November 18, 2020, as amended on January 28, 2021.
“Company Restricted Stock Award” means an award of shares of Company Common Stock that are subject to vesting and/or a right of
repurchase.
“Company Stockholder” shall mean a holder of a share of Company Common Stock and Company Preferred Stock issued and
outstanding immediately prior to the Effective Time.
“Company Stockholders Meeting” means the special meeting of the Company Stockholders to be held to consider the adoption of this
Agreement.
“Company Transaction Costs” shall mean all fees, costs and expenses of the Group Companies, in each case, incurred prior to and
through the Closing Date in connection with the negotiation, preparation and execution of this Agreement, the other Transaction Agreements
and the consummation of the Transactions, including: (a) all change of control bonus payments, retention or similar payments payable solely
as a result of the consummation of the Transactions pursuant to arrangements (whether written or oral) entered into prior to the Closing Date
whether payable before (to the extent unpaid), on or following the Closing Date (excluding any “double-trigger” payments), and the employer
portion of payroll Taxes payable as a result of the foregoing amounts; (b) all severance payments, retirement payments or similar payments
or success fees payable pursuant to arrangements (whether written or oral) entered into prior to the Closing Date and which are payable in
connection with the consummation of the Transactions, whether payable before (to the extent unpaid), on or following the Closing Date
(excluding any “double-trigger payments”), and the employer portion of payroll Taxes payable as a result of the foregoing amounts; (c) all
transaction, deal, brokerage, financial advisory or any similar fees payable in connection with the consummation of the Transactions; and (d)
all costs, fees and expenses related to the D&O Tail; but excluding (i) any and all costs, fees and expenses incurred in connection with the
preparation and filing of the Proxy Statement (and any registration statement filed with the SEC in connection therewith) and the review
and/or approval thereof by the SEC, (ii) any and all costs, fees and expenses incurred in connection with the listing on Nasdaq of the shares
of Parent Class A Stock issued in connection with the Transactions, (iii) any transfer, documentary, sales, use, stamp, registration, excise,
recording, registration value added and other similar Taxes and fees (including any penalties or interest) payable in connection with the
Transactions, and (iv) any other amounts payable by Parent hereunder.
“Company’s Required Funds” shall mean an amount equal to $1,000,000,000.
“Confidentiality Agreement” shall mean that certain Confidentiality Agreement, dated as of May 27, 2021, by and between the
Company and Parent, as amended from time to time.
“Contract” shall mean any contract, subcontract, agreement, indenture, note, bond, loan or credit agreement, instrument, installment
obligation, lease, mortgage, deed of trust, license, sublicense, commitment, power of attorney, guaranty or other legally binding commitment,
arrangement, understanding or obligation, whether written or oral, in each case, as amended and supplemented from time to time and
including all schedules, annexes and exhibits thereto.
“COVID-19” shall mean the novel coronavirus, SARS-CoV-2 or COVID-19 or any mutation of the same, including any resulting
epidemics, pandemics, disease outbreaks or public health emergencies.
“Current Government Contract” shall mean any Government Contract the period of performance of which has not yet expired or been
terminated.
“Earn-Out Period” shall mean the time period beginning on the date that is the twelve (12)-month anniversary of the Closing and
ending on the date that is the thirty-six (36)-month anniversary of the Closing (inclusive of the first and last day of such period).
“Earn-Out Pro Rata Share” shall mean for each Company Stockholder, such amount determined in accordance with the following
formula and as applied by Board of Directors of Parent in good faith: (The total number of Earn-Out Shares minus the number of Earn-Out
Shares underlying any Earn-Out RSUs then outstanding) multiplied by (such Company Stockholder’s pro rata portion of the Closing Number
of Securities then outstanding divided by the total Closing Number of Securities then outstanding).
“Earn-Out RSU” shall mean the award of restricted stock units in respect of the Earn-Out Shares granted to the Earn-Out Service
Providers pursuant to the Earn-Out Award Agreement.
“Earn-Out Service Provider” shall mean each employee or individual service provider of the Company, in each case whom the board of
directors of the Company designates as an Earn-Out Service Provider prior to the Closing and who enters into an Earn-Out Award
Agreement.
“Environmental Law” shall mean any and all applicable Legal Requirements relating to pollution, Hazardous Materials, or the protection
of the environment, natural resources, or human health and safety.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Company or any of its
Subsidiaries is treated as a single employer under Section 414 of the Code.
“Equity Exchange Ratio” shall mean the quotient, of: (a) the Per Share Amount divided by (b) $10.00.
“Exchange Act” shall mean the United States Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Fundamental Representations” shall mean: (a) in the case of the Company, the representations and warranties contained in Section
4.1 (Organization and Qualification); Section 4.2 (Company Subsidiaries); Section 4.3 (Capitalization); Section 4.4 (Due Authorization); and
Section 4.17 (Brokers; Third Party Expenses); and (b) in the case of Parent, the representations and warranties contained in Section 5.1
(Organization and Qualification); Section 5.2 (Parent Subsidiaries); Section 5.3 (Capitalization); Section 5.4 (Authority Relative to this
Agreement); and Section 5.10 (Business Activities; Liabilities).
“GAAP” shall mean United States generally accepted accounting principles, consistently applied.
“Government Contract” shall mean any prime contract, subcontract, purchase order, task order, delivery order, basic ordering
agreement, pricing agreement, letter contract or other similar written arrangement of any kind, including all amendments, modifications and
options thereunder or relating thereto between the Company or a Company Subsidiary, on the one hand, and: (a) any Governmental Entity;
(b) any prime contractor of a Governmental Entity in its capacity as a prime contractor; or (c) any subcontractor at any tier performing work
that is directly charged to any contract of a type described in clauses (a) or (b) above, on the other hand. A purchase, task or delivery order,
or any other ordering agreement, under a Government Contract shall not constitute a separate Government Contract, for purposes of this
definition, but shall be part of the Government Contract to which it relates.
“Governmental Entity” shall mean any federal, state, provincial, municipal, local or foreign government, governmental authority,
regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, court or tribunal.
“Group Companies” shall mean the Company and all of its direct and indirect Subsidiaries.
“Hazardous Material” shall mean any substance, material or waste that is listed, classified, defined, characterized or otherwise
regulated by a Governmental Entity as a “toxic substance,” “hazardous substance,” “hazardous material” or words of similar meaning or
effect, including any radioactive materials.
“HIPAA” shall mean the United State Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §§ 1320d through 1329d-
8), as amended by the Health Information Technology for Economic and Clinical Health Act (Pub. L. No. 111-5), and all applicable
implementing regulations, including its implementing regulations codified at 45 C.F.R. Parts 160, 162, and 164.
“Indebtedness” shall mean any of the following: (a) any indebtedness for borrowed money; (b) any obligations evidenced by bonds,
debentures, notes or other similar instruments; (c) any obligations to pay the deferred purchase price of property or services, except trade
accounts payable and other current liabilities; (d) any obligations as lessee under capitalized leases; (e) any obligations, contingent or
otherwise, under acceptance, letters of credit or similar facilities to the extent drawn; (f) any guaranty of any of the foregoing; (g) any accrued
interest, fees and charges in respect of any of the foregoing; and (h) any prepayment premiums and penalties actually due and payable, and
any other fees, expenses, indemnities and other amounts actually payable as a result of the prepayment or discharge of any of the foregoing.
“Intellectual Property” shall mean all worldwide rights, title and interest in or relating to intellectual property, whether protected, created
or arising under the laws of the United States or any other jurisdiction, including: (a) all patents and patent applications, including provisional
patent applications and similar filings and any and all substitutions, divisions, continuations, continuations-in-part, divisions, reissues,
renewals, extensions, reexaminations, patents of addition, supplementary protection certificates, utility models, inventors’ certificates, or the
like and any foreign equivalents of the foregoing (including certificates of invention and any applications therefor) (collectively, “Patents”); (b)
all trademarks, business marks, service marks, brand names, trade dress rights, logos, corporate names, and trade names, and other source
or business identifiers and general intangibles of a like nature, together with the goodwill associated with any of the foregoing, along with all
applications, registrations, intent-to-use registrations or similar reservations of marks, renewals and extensions thereof (collectively,
“Trademarks”); (c) all registered and unregistered copyrights and applications for registration of copyright (collectively, “Copyrights”); (d) all
internet domain names; (e) trade secrets, know-how, technology, discoveries and improvements, know-how, proprietary rights, formulae,
confidential and proprietary information, technical information, techniques, inventions (including conceptions and/or reductions to practice),
designs, drawings, procedures, processes, models, formulations, manuals and systems, whether or not patentable or copyrightable
(collectively “Trade Secrets”); (f) databases; and (g) all other intellectual property, intellectual property rights, proprietary information and
proprietary rights.
“Knowledge” shall mean the actual knowledge or awareness as to a specified fact or event of: (a) with respect to the Company, the
individuals listed on Schedule 1.2-A of the Company Disclosure Letter; and (b) with respect to Parent or Merger Sub, the individuals listed on
Schedule 1.2-B of the Parent Disclosure Letter.
“Legal Proceeding” shall mean any action, suit, hearing, claim, charge, audit, lawsuit, litigation, investigation (formal or informal),
inquiry, arbitration or proceeding (in each case, whether civil, criminal or administrative or at law or in equity) by or before a Governmental
Entity.
“Legal Requirements” shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, treaty, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling, injunction, judgment, order, assessment, writ or other legal
requirement, administrative policy, or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity having jurisdiction over a given matter.
“Licensed Intellectual Property” shall mean all Intellectual Property exclusively licensed to any of the Group Companies.
“Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien, restriction or charge of any kind (including, any
conditional sale or other title retention agreement or lease in the nature thereof, any agreement to give any security interest and any
restriction relating to use, quiet enjoyment, voting, transfer, receipt of income or exercise of any other attribute of ownership).
“OFAC” shall mean the U.S. Treasury Department Office of Foreign Assets Control.
“Order” shall mean any award, injunction, judgment, regulatory or supervisory mandate, order, writ, decree or ruling entered, issued,
made, or rendered by any Governmental Entity that possesses competent jurisdiction.
“Owned Intellectual Property” shall mean all Intellectual Property which any of the Group Companies has (or purports to have) an
ownership interest.
“Pandemic Measures” shall mean any quarantine, isolation, “shelter in place,” “stay at home,” workforce reduction, social distancing,
shut down, closure, sequester or any other Legal Requirement, by any Governmental Entity or industry group in connection with or in
response to COVID-19, including, the Coronavirus Aid, Relief, and Economic Security Act (CARES), or any other pandemic, epidemic, public
health emergency or disease outbreak.
“Parent Cash” shall mean, as of the date of determination: (a) all amounts in the Trust Account; plus (b) the Equity Financing Amount.
“Parent Material Adverse Effect” shall mean any change, event, or occurrence, that, individually or when aggregated with other
changes, events, or occurrences has had a materially adverse effect on the business, assets, financial condition or results of operations of
Parent and Merger Sub, taken as a whole; provided, however, that no change or effect related to any of the following, alone or in
combination, shall be taken into account in determining whether a Parent Material Adverse Effect has occurred: (i) changes or proposed
changes in Applicable Legal Requirements, regulations or interpretations thereof or decisions by courts or any Governmental Entity after the
date of this Agreement; (ii) changes or proposed changes in GAAP (or any interpretation thereof) after the date of this Agreement; or (iii) any
downturn in general economic conditions, including changes in the credit, debt, securities, financial, capital or reinsurance markets (including
changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets), in each case,
in the United States or anywhere else in the world.
“Parent Organizational Documents” shall mean the Amended and Restated Certificate of Incorporation of Parent, dated as of April 6,
2021 (the “Parent Charter”) and the Bylaws of Parent or any other similar organization documents of Parent, as each may be amended,
modified or supplemented.
“Parent Stockholder Approval” shall mean the approval of each Parent Stockholder Matter identified in Section 7.1(a) by the affirmative
vote or written consent of the holders of the requisite number of Parent Shares entitled to vote thereon, whether in person or by proxy at the
Special Meeting (or any adjournment thereof) or by written consent, in each case, in accordance with the Parent Organizational Documents,
Applicable Legal Requirements and the rules of Nasdaq.
“Parent Transaction Costs” shall mean: (a) all fees, costs and expenses of Parent incurred prior to and through the Closing Date in
connection with the negotiation, preparation and execution of this Agreement, the other Transaction Agreements and the consummation of
the Transactions, whether paid or unpaid prior to the Closing, including any and all professional or transaction related costs, fees and
expenses of legal, accounting and financial advisors, consultants, auditors, accountants and brokers, including any deferred underwriting
commissions being held in the Trust Account; and (b) any Indebtedness of Parent or its Subsidiaries owed to its Affiliates or stockholders;
provided, however, the legal fees paid to Parent’s counsel (excluding fees paid in connection with any litigation or similar proceedings, if any,
in connection with the Transaction), deferred underwriter, private placement and printer fees and costs of parties retained by Parent in
connection with merger and acquisition advice, in each case for services rendered through the Closing shall not exceed $35,000,000, without
the Company’s prior written consent.
“Parent Units” shall mean equity securities of Parent each consisting of one share of Parent Class A Stock and one-third of one Public
Warrant.
“Permitted Lien” shall mean: (a) Liens for current period Taxes not yet delinquent or for Taxes that are being contested in good faith by
appropriate proceedings and in each case that are sufficiently reserved for on the Financial Statements in accordance with GAAP; (b)
statutory and contractual Liens of landlords with respect to Leased Real Property; (c) Liens of carriers, warehousemen, mechanics,
materialmen and repairmen incurred in the ordinary course and: (i) not yet delinquent; or (ii) that are being contested in good faith through
appropriate proceedings; (d) in the case of Leased Real Property, zoning, building, or other restrictions, variances, covenants, rights of way,
encumbrances, easements and other irregularities in title, none of which, individually or in the aggregate, interfere in any material respect
with the present use of or occupancy of the affected parcel by any of the Group Companies; (e) Liens securing the Indebtedness of any of
the Group Companies; (f) in the case of Intellectual Property, non-exclusive licenses granted to third parties in the ordinary course; (g) Liens
incurred in connection with capital lease obligations of any of the Group Companies; and (h) all exceptions, restrictions, easements,
imperfections of title (including gaps in the chain of title evident from the records of the relevant Governmental Entity maintaining such
records), charges, rights-of-way and other Liens of record that do not materially interfere with the present use of the assets of the Group
Companies, taken as a whole.
“Per Share Amount” shall mean the quotient, rounded to the nearest one-tenth of a cent, obtained by dividing (a) the Closing Merger
Consideration by (b) the Aggregate Company Share Amount.
“Person” shall mean any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other
enterprise, association, organization, entity or Governmental Entity.
“Permitted Transaction” shall mean any of the following transactions with third parties: (i) strategic drug creation, development, and
commercialization collaborations using a third party’s artificial intelligence (AI) or machine-learning platforms for drug discovery, (ii) non-U.S.
and European distribution or commercialization arrangements, (iii) supply and manufacturing agreements, and (iv) research and license
collaborations for combination drug or therapy studies and research.
“Personal Information” shall mean, in addition to any definition for any similar term (e.g., “personally identifiable information” or “PII”)
provided by Applicable Legal Requirement, all information that identifies, could be used to identify or is otherwise associated with an
individual person or device, whether or not such information is associated with an identifiable individual. Personal Information may relate to
any individual, including a current, prospective, or former customer, end user or employee of any Person. For the avoidance of doubt, this
includes “personal data” as defined in the GDPR and the UK GDPR.
“Privacy Laws” shall mean any and all Applicable Legal Requirements (including of any applicable foreign jurisdiction) relating to the
receipt, collection, compilation, use, storage, transmission, transfer (including cross-border transfers), processing, privacy, sharing,
safeguarding, security (both technical and physical), disposal, destruction, disclosure or transfer (including cross-border) of Personal
Information, including, but not limited to, HIPAA; the California Consumer Privacy Act (CCPA); Regulation (EU) 2016/679 (“GDPR”);
Regulation (EU) 2016/679, as it forms part of the law of England and Wales, Scotland and Northern Ireland by virtue of the Data Protection
Act 2018 (the “DPA 2018”) as amended by the Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit)
Regulations 2019 (the “UK GDPR”); and any and all Applicable Legal Requirements relating to breach notification in connection with
Personal Information.
“Related Parties” shall mean, with respect to a Person, such Person’s former, current and future direct or indirect equityholders,
controlling Persons, stockholders, optionholders, members, general or limited partners, Affiliates, Representatives, and each of their
respective Affiliates, successors and assigns.
“SEC” shall mean the United States Securities and Exchange Commission.
“Securities Act” shall mean the United States Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
“Softbank” shall mean SB Northstar LP or its affiliates.
“Specified Business Conduct Laws” shall mean: (a) the U.S. Foreign Corrupt Practices Act of 1977, the UK Bribery Act, and other
Applicable Legal Requirements relating to bribery or corruption; (b) all Legal Requirements imposing trade sanctions on any Person,
including, all Legal Requirements administered by OFAC, all sanctions laws or embargos imposed or administered by the U.S. Department of
State, the United Nations Security Council, Her Majesty’s Treasury or the European Union and all anti-boycott or anti-embargo laws; (c) all
Legal Requirements relating to the import, export, re-export, transfer of information, data, goods, and technology, including the Export
Administration Regulations (“EAR”) administered by the U.S. Department of Commerce and the International Traffic in Arms Regulations
administered by the U.S. Department of State; and (d) the Money Laundering Control Act, the Currency and Foreign Transactions Reporting
Act, The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, and
other Applicable Legal Requirements relating to money laundering.
“Sponsor” shall mean CMLS Holdings III LLC, a Delaware limited liability company.
“Sponsor Support Agreement” shall mean that certain Support Agreement, dated as of the date hereof, by and among the Sponsor,
Parent and the Company, as amended or modified from time to time.
“Subsidiary” shall mean, with respect to any Person, any partnership, limited liability company, corporation or other business entity of
which: (a) if a corporation, a majority of the total voting power of
shares of capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or
trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person
or a combination thereof; (b) if a partnership, limited liability company or other business entity, a majority of the partnership or other similar
ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person
or a combination thereof; or (c) in any case, such Person controls the management thereof.
“Tax” or “Taxes” shall mean: (a) any and all federal, state, local and foreign taxes, including, without limitation, gross receipts, income,
profits, license, sales, use, estimated, occupation, value added, ad valorem, transfer, franchise, withholding, payroll, recapture, net worth,
employment, escheat and unclaimed property obligations, excise and property taxes, assessments, stamp, environmental, registration,
governmental charges, duties, levies and other similar charges, in each case, imposed by a Governmental Entity, (whether disputed or not)
together with all interest, penalties and additions imposed by a Governmental Entity with respect to any such amounts; and (b) any liability in
respect of any items described in clause (a) payable by reason of Contract transferee liability, operation of law or Treasury Regulation
Section 1.1502-6(a) (or any predecessor or successor thereof of any analogous or similar provision under law) or otherwise.
“Tax Return” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes that is filed
or required to be filed with a Governmental Entity, including any schedule or attachment thereto and any amendment thereof.
“Total Outstanding Company Shares” shall mean the sum, without duplication, of (a) the aggregate number of shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective Time plus (b) the aggregate number of shares of Company
Common Stock that would be issuable upon the conversion all shares of Company Preferred Stock that are issued and outstanding
immediately prior to the Effective Time into shares of Company Common Stock pursuant to the Company Organizational Documents.
“Total Stockholder Outstanding Shares” shall mean, with respect to a Company Stockholder, the sum of (a) the aggregate number of
shares of Company Common Stock held by such Company Stockholder immediately prior to the Effective Time plus (b) the aggregate
number of shares of Company Common Stock that would be issuable upon the conversion all shares of Company Preferred Stock held by
such Company Stockholder immediately prior to the Effective Time into shares of Company Common Stock pursuant to the Company
Organizational Documents.
“Trading Day” means any day on which shares of Parent Class A Stock are actually traded on the principal securities exchange or
securities market on which shares of Parent Class A Stock are then traded.
“Transaction Agreements” shall mean this Agreement, the A&R Registration Rights Agreement, the Equity Financing Agreements, the
Confidentiality Agreement, the Sponsor Support Agreement, the Sponsor Forfeiture Agreement, the Earn-Out Escrow Agreement, the Parent
A&R Charter, and all the agreements documents, instruments and certificates entered into in connection herewith or therewith and any and
all exhibits and schedules thereto.
“Transactions” shall mean the transactions contemplated pursuant to this Agreement, including the Merger.
“Treasury Regulations” shall mean the regulations promulgated by the U.S. Department of the Treasury pursuant to and in respect of
provisions of the Code.
“Triggering Event I” shall occur if, within the Earn-Out Period, the Common Share Price of Parent Class A Stock is greater than or
equal to $12.50 per share.
“Triggering Event II” shall occur if, within the Earn-Out Period, the Common Share Price of Parent Class A Stock is greater than or
equal to $16.50 per share.
“Triggering Events” shall mean Triggering Event I and Triggering Event II.
“Warrant Accounting Issue” shall mean the fact that, pursuant to Applicable Legal Requirements or requirements of the SEC in effect
or announced as of the date of this Agreement, Parent may have improperly accounted for its outstanding warrants as equity instruments
and may be required to restate its previously filed financial statements to reflect the classification of its outstanding warrants as liabilities for
accounting purposes (together with any deficiencies in disclosure (including, without limitation, with respect to internal control over financial
reporting or disclosure controls and procedures)) arising from the treatment of such warrants of Parent as equity rather than liabilities.
WARRANT AGREEMENT
CM LIFE SCIENCES III INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Dated April 6, 2021
Exhibit 4.4 (a)
THIS WARRANT AGREEMENT (this “Agreement”), dated April 6, 2021, is by and between CM Life Sciences III Inc., a Delaware corporation
(the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (in such capacity, the “Warrant Agent”).
WHEREAS, it is proposed that the Company enter into that certain Private Placement Warrants Purchase Agreement, with CMLS Holdings III
LLC, a Delaware limited liability company (the “Sponsor”), and those individuals named in Exhibit A thereto (together with the Sponsor, the
“Purchasers”) pursuant to which the Purchasers will purchase an aggregate of 7,733,333 warrants (or up to 8,693,333 warrants if the underwriters in the
Offering (defined below) exercise their Over-allotment Option (as defined below) in full) simultaneously with the closing of the Offering (and the closing
of the Over-allotment Option, if applicable), bearing the legend set forth in Exhibit B hereto (the “Private Placement Warrants”) at a purchase price of
$1.50 per Private Placement Warrant. Each Private Placement Warrant entitles the holder thereof to purchase one share of Common Stock (as defined
below) at a price of $11.50 per share, subject to adjustment as described herein; and
WHEREAS, in order to finance the Company’s transaction costs in connection with an intended initial merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination, involving the Company and one or more businesses (a “Business
Combination”), the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the
Company funds as the Company may require, of which up to $1,500,000 of such loans may be convertible into up to an additional 1,000,000 Private
Placement Warrants at a price of $1.50 per Private Placement Warrant; and
WHEREAS, the Company is engaged in an initial public offering (the “Offering”) of units of the Company’s equity securities, each such unit
comprised of one share of Class A common stock of the Company, par value $0.0001 per share (“Common Stock”), and one-fifth of one Public Warrant (as
defined below) (the “Units”) and, in connection therewith, has determined to issue and deliver up to 11,040,000 redeemable warrants (including up to
1,440,000 redeemable warrants subject to the Over-allotment Option) to public investors in the Offering (the “Public Warrants” and, together with the
Private Placement Warrants, the “Warrants”). Each whole Warrant entitles the holder thereof to purchase one share of Common Stock for $11.50 per share,
subject to adjustment as described herein. Only whole Warrants are exercisable. A holder of the Public Warrants will not be able to exercise any fraction of
a Warrant; and
WHEREAS, the Company has filed with the Securities and Exchange Commission (the “Commission”) registration statements on Form S-1,
File Nos. 333-253475 and 333-255078, and prospectus (the “Prospectus”), for the registration, under the Securities Act of 1933, as amended (the
“Securities Act”), of the Units, the Public Warrants, the Common Stock included in the Units and the Common Stock issuable upon exercise of the Public
Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants; and
WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and
exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent and the holders of the Warrants; and
WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the
Company and countersigned by or on behalf of the Warrant Agent (if a physical certificate is issued), as provided herein, the valid, binding and legal
obligations of the Company, and to authorize the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the
Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.
2. Warrants.
2.1. Form of Warrant. Each Warrant shall initially be issued in registered form only.
Agreement, a certificated Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.
2.2. Effect of Countersignature. If a physical certificate is issued, unless and until countersigned by the Warrant Agent pursuant to this
2.3. Registration.
2.3.1. Warrant Register. The Warrant Agent shall maintain books (the “Warrant Register”), for the registration of original
issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants in book-entry form, the Warrant Agent shall issue and
register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the
Warrant Agent by the Company. Ownership of beneficial interests in the Public Warrants shall be shown on, and the transfer of such ownership shall be
effected through, records maintained by institutions that have accounts with The Depository Trust Company (the “Depositary”) (such institution, with
respect to a Warrant in its account, a “Participant”).
If the Depositary subsequently ceases to make its book-entry settlement system available for the Public Warrants, the Company may instruct the
Warrant Agent regarding making other arrangements for book-entry settlement. In the event that the Public Warrants are not eligible for, or it is no longer
necessary to have the Public Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depositary to deliver to the
Warrant Agent for cancellation each book-entry Public Warrant, and the Company shall instruct the Warrant Agent to deliver to the Depositary definitive
certificates in physical form evidencing such Warrants (“Definitive Warrant Certificates”) which shall be in the form annexed hereto as Exhibit A.
Physical certificates, if issued, shall be signed by, or bear the facsimile signature of, the Chairman of the Board, Chief Executive Officer or other
principal officer of the Company. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the
capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be
such at the date of issuance.
2.3.2. Registered Holder. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant
Agent may deem and treat the person in whose name such Warrant is registered in the Warrant Register (the “Registered Holder”) as the absolute owner of
such Warrant and of each Warrant represented thereby, for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
2.4. Detachability of Warrants. The shares of Common Stock and Public Warrants comprising the Units shall begin separate trading on
the 52nd day following the date of the Prospectus or, if such 52nd day is not on a day, other than a Saturday, Sunday or federal holiday, on which banks in
New York City are generally open for normal business (a “Business Day”), then on the immediately succeeding Business Day following such date, or
earlier (the “Detachment Date”) with the consent of Jefferies LLC and Cowen and Company, LLC, but in no event shall the shares of Common Stock and
the Public Warrants comprising the Units be separately traded until (A) the Company has filed a Current Report on Form 8-K with the Commission
containing an audited balance sheet reflecting the receipt by the Company of the gross proceeds of the Offering, including the proceeds then received by
the Company from the exercise by the underwriters of their right to purchase additional Units in the Offering (the “Over-allotment Option”), if the Over-
allotment Option is exercised prior to the filing of the Current Report on Form 8-K, and (B) the Company issues a press release announcing when such
separate trading shall begin.
2.5. Fractional Warrants. The Company shall not issue fractional Warrants other than as part of the Units, each of which is comprised
of one share of Common Stock and one-fifth of one whole Public Warrant. If, upon the detachment of Public Warrants from the Units or otherwise, a holder
of Warrants would be entitled to receive a fractional Warrant, the Company shall round down to the nearest whole number the number of Warrants to be
issued to such holder.
2.6. Private Placement Warrants. The Private Placement Warrants shall be identical to the Public Warrants, except that so long as they
are held by a Purchaser or any of its Permitted Transferees (as defined below) the Private Placement Warrants: (i) may be exercised for cash or on a
“cashless basis,” pursuant to subsection 3.3.1(c) hereof, (ii) including the shares of Common Stock issuable upon exercise of the Private Placement
Warrants, may not be transferred, assigned or sold until thirty (30) days after the completion by the Company of an initial Business Combination, (iii) shall
not be redeemable by the Company pursuant to Section 6.1 hereof and (iv) shall only be redeemable by the Company pursuant to Section 6.2 if the
Reference Value (as defined below) is less than $18.00 per share (subject to adjustment in compliance with Section 4 hereof); provided, however, that in
the case of (ii), the Private Placement Warrants and any shares of Common Stock issued upon exercise of the Private Placement Warrants may be
transferred by the holders thereof:
(a) to the Company’s officers or directors, any affiliates or family members of any of the Company’s officers or directors,
any members or partners of the Sponsor or their affiliates (including members of the Sponsor’s members), any affiliates of the Sponsor, or any employees
of such affiliates;
(b) in the case of an individual, by gift to a member of one of the individual’s immediate family or to a trust, the beneficiary
of which is a member of the individual’s immediate family, an affiliate of such person or to a charitable organization;
(c) in the case of an individual, by virtue of laws of descent and distribution upon death of the individual;
(d) in the case of an individual, pursuant to a qualified domestic relations order;
prices no greater than the price at which the Private Placement Warrants or Common Stock, as applicable, were originally purchased;
(f) by virtue of the laws of the State of Delaware or the Sponsor’s organizational documents upon liquidation or dissolution
(e) by private sales or transfers made in connection with the consummation of the Company’s Business Combination at
of the Sponsor;
(g) to the Company for no value for cancellation in connection with the consummation of its initial Business Combination;
(h) in the event of the Company’s liquidation prior to the completion of its initial Business Combination; or
(i) in the event of the Company’s completion of a liquidation, merger, capital stock exchange or other similar transaction
which results in all of the Company’s stockholders having the right to exchange their Common Stock for cash, securities or other property subsequent to the
completion of the Company’s initial Business Combination;
provided, however, that, in the case of clauses (a) through (f), these permitted transferees (the “Permitted Transferees”) must enter into a written
agreement with the Company agreeing to be bound by the transfer restrictions in this Agreement.
3. Terms and Exercise of Warrants.
3.1. Warrant Price. Each whole Warrant shall entitle the Registered Holder thereof, subject to the provisions of such Warrant and of
this Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $11.50 per share, subject to the
adjustments provided in Section 4 hereof and in the last sentence of this Section 3.1. The term “Warrant Price” as used in this Agreement shall mean the
price per share (including in cash or by payment of Warrants pursuant to a “cashless exercise,” to the extent permitted hereunder) described in the prior
sentence at which shares of Common Stock may be purchased at the time a Warrant is exercised. The Company in its sole discretion may lower the Warrant
Price at any time prior to the Expiration Date (as defined below) for a period of not less than fifteen Business Days (unless otherwise required by the
Commission, any national securities exchange on which the Warrants are listed or applicable law); provided that the Company shall provide at least five
days’ prior written notice of such reduction to Registered Holders of the Warrants; and provided further, that any such reduction shall be identical among
all of the Warrants.
3.2. Duration of Warrants. A Warrant may be exercised only during the period (the “Exercise Period”) (A) commencing on the later of
the date that is thirty (30) days after the first date on which the Company completes a Business Combination and (B) terminating at the earliest to occur of
(x) 5:00 p.m., New York City time on the date that is five (5) years after the date on which the Company completes its initial Business Combination, (y) the
liquidation of the Company in accordance with the Company’s amended and restated certificate of incorporation (as amended from time to time, the
“Charter”), if the Company fails to complete a Business Combination, and (z) other than with respect to the Private Placement Warrants then held by a
Purchaser or its Permitted Transferees with respect to a redemption pursuant to Section 6.1 hereof or, if the Reference Value equals or exceeds $18.00 per
share (subject to adjustment in compliance with Section 4 hereof), Section 6.2 hereof, 5:00 p.m., New York City time on the Redemption Date (as defined
below) as provided in Section 6.3 hereof; provided, however, that the exercise of any Warrant shall be subject to the satisfaction of any applicable
conditions, as set forth in subsection 3.3.2 below, with respect to an effective registration statement or a valid exemption therefrom being available. Except
with respect to the right to receive the Redemption Price (as defined below) (other than with respect to a Private Placement Warrant then held by a
Purchaser or its Permitted Transferees in connection with a redemption pursuant to Section 6.1 hereof or, if the Reference Value equals or exceeds $18.00
per share (subject to adjustment in compliance with Section 4 hereof), Section 6.2 hereof) in the event of a redemption (as set forth in Section 6 hereof),
each Warrant (other than a Private Placement Warrant then held by a Purchaser or its Permitted Transferees in the event of a redemption pursuant to Section
6.1 hereof or, if the Reference Value equals or exceeds $18.00 per share (subject to adjustment in
compliance with Section 4 hereof), Section 6.2 hereof) not exercised on or before the Redemption Date shall become void, and all rights thereunder and all
rights in respect thereof under this Agreement shall cease at 5:00 p.m. New York City time on the Redemption Date. The Company in its sole discretion
may extend the duration of the Warrants by delaying the Redemption Date; provided that the Company shall provide at least twenty (20) days prior written
notice of any such extension to Registered Holders of the Warrants and, provided further that any such extension shall be identical in duration among all the
Warrants.
3.3. Exercise of Warrants.
3.3.1. Payment. Subject to the provisions of the Warrant and this Agreement, a Warrant may be exercised by the Registered
Holder thereof by delivering to the Warrant Agent at its corporate trust department (i) the Definitive Warrant Certificate evidencing the Warrants to be
exercised, or, in the case of a Warrant represented by a book-entry, the Warrants to be exercised (the “Book-Entry Warrants”) on the records of the
Depositary to an account of the Warrant Agent at the Depositary designated for such purposes in writing by the Warrant Agent to the Depositary from time
to time, (ii) an election to purchase (“Election to Purchase”) any shares of Common Stock pursuant to the exercise of a Warrant, properly completed and
executed by the Registered Holder on the reverse of the Definitive Warrant Certificate or, in the case of a Book-Entry Warrant, properly delivered by the
Participant in accordance with the Depositary’s procedures, and (iii) the payment in full of the Warrant Price for each share of Common Stock as to which
the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant, the exchange of the Warrant for the shares of
Common Stock and the issuance of such shares of Common Stock, as follows:
(a) in lawful money of the United States, in good certified check, good bank draft or wire transfers payable to the order of
the Warrant Agent;
(b) [Reserved];
(c) with respect to any Private Placement Warrant, so long as such Private Placement Warrant is held by a Purchaser or a
Permitted Transferee, by surrendering the Warrants for that number of shares of Common Stock equal to (i) if in connection with a redemption of Private
Placement Warrants pursuant to Section 6.2 hereof, as provided in Section 6.2 hereof with respect to a Make-Whole Exercise (as defined below) and (ii) in
all other scenarios, the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the
excess of the “Purchaser Exercise Fair Market Value” (as defined in this subsection 3.3.1(c)) less the Warrant Price by (y) the Purchaser Exercise Fair
Market Value. Solely for purposes of this subsection 3.3.1(c), the “Purchaser Exercise Fair Market Value” shall mean the average last reported sale price
of the Common Stock for the ten (10) trading days ending on the third (3rd) trading day prior to the date on which notice of exercise of the Private
Placement Warrant is sent to the Warrant Agent;
(d) as provided in Section 6.2 hereof with respect to a Make-Whole Exercise; or
(e) as provided in Section 7.4 hereof.
3.3.2. Issuance of Common Stock on Exercise. As soon as practicable after the exercise of any Warrant and the clearance of
the funds in payment of the Warrant Price (if payment is pursuant to subsection 3.3.1(a)), the Company shall issue to the Registered Holder of such Warrant
a book-entry position or certificate, as applicable, for the number of whole shares of Common Stock to which he, she or it is entitled, registered in such
name or names as may be directed by him, her or it on the register of members of the Company, and if such Warrant shall not have been exercised in full, a
new book-entry position or countersigned Warrant, as applicable, for the number of shares as to which such Warrant shall not have been exercised.
Notwithstanding the foregoing, the Company shall not be obligated to deliver any shares of Common Stock pursuant to the exercise of a Warrant and shall
have no obligation to settle such Warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock
underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations under
Section 7.4 hereof or a valid exemption from registration is available. No Warrant shall be exercisable and the Company shall not be obligated to issue
shares of Common Stock upon exercise of a Warrant unless the shares of Common Stock issuable upon such Warrant exercise have been registered,
qualified or deemed to be exempt from registration or qualification under the securities laws of the state of residence of the Registered Holder of the
Warrants. Subject to Section 4.6 of this Agreement, a Registered Holder of Warrants may exercise its Warrants only for a whole number of shares of
Common Stock. The Company may require holders of Public Warrants to settle the Warrant on a “cashless basis” pursuant to Section 7.4 hereof. If, by
reason of any exercise of Warrants on a “cashless basis”, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a
fractional interest in a share of Common Stock, the Company shall round down to the nearest whole number, the number of shares of Common Stock to be
issued to such holder.
3.3.3. Valid Issuance. All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this
Agreement shall be validly issued, fully paid and nonassessable.
3.3.4. Date of Issuance. Each person in whose name any book-entry position or certificate, as applicable, for shares of
Common Stock is issued and who is registered in the register of members of the Company shall for all purposes be deemed to have become the holder of
record of such shares of Common Stock on the date on which the Warrant, or book-entry position representing such Warrant, was surrendered and payment
of the Warrant Price was made, irrespective of the date of delivery of such certificate in the case of a certificated Warrant, except that, if the date of such
surrender and payment is a date when the register of members of the Company or book-entry system of the Warrant Agent are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the next succeeding date on which the share transfer books or book-entry
system are open.
3.3.5. Maximum Percentage. A holder of a Warrant may notify the Company in writing in the event it elects to be subject to
the provisions contained in this subsection 3.3.5; however, no holder of a Warrant shall be subject to this subsection 3.3.5 unless he, she or it makes such
election. If the election is made by a holder, the Warrant Agent shall not effect the exercise of the holder’s Warrant, and such holder shall not have the right
to exercise such Warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the Warrant Agent’s
actual knowledge, would beneficially own in excess of 4.9% or 9.8% (as specified by the holder) (the “Maximum Percentage”) of the shares of Common
Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common
Stock beneficially owned by such person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with
respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock that would be issuable upon (x) exercise of
the remaining, unexercised portion of the Warrant beneficially owned by such person and its affiliates and (y) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned by such person and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein.
Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes of the Warrant, in determining the number of outstanding shares of
Common Stock, the holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Annual Report
on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the Commission as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the Company or Continental Stock Transfer & Trust Company, as transfer agent (in
such capacity, the “Transfer Agent”), setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written
request of the holder of the Warrant, the Company shall, within two (2) Business Days, confirm orally and in writing to such holder the number of shares of
Common Stock then outstanding. In any case, the number of issued and outstanding shares of Common Stock shall be determined after giving effect to the
conversion or exercise of equity securities of the Company by the holder and its affiliates since the date as of which such number of issued and outstanding
shares of Common Stock was reported. By written notice to the Company, the holder of a Warrant may from time to time increase or decrease the
Maximum Percentage applicable to such holder to any other percentage specified in such notice; provided, however, that any such increase shall not be
effective until the sixty-first (61st) day after such notice is delivered to the Company.
4. Adjustments.
4.1. Stock Dividends.
4.1.1. Split-Ups. If after the date hereof, and subject to the provisions of Section 4.6 below, the number of issued and
outstanding shares of Common Stock is increased by a stock dividend of Common Stock, or by a split-up of shares of Common Stock or other similar
event, then, on the effective date of such share split-ups or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall
be increased in proportion to such increase in the issued and outstanding shares of Common Stock. A rights offering made to all or substantially all holders
of the Common Stock entitling holders to purchase shares of Common Stock at a price less than the “Historical Fair Market Value” (as defined below) shall
be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock actually sold in
such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for shares of Common
Stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of Common Stock paid in such rights offering divided by (y) the Historical
Fair Market Value. For purposes of this subsection 4.1.1, (i) if the rights offering is for securities convertible into or exercisable for shares of Common
Stock, in determining the price payable for shares of Common Stock, there shall be taken into account any consideration received for such
rights, as well as any additional amount payable upon exercise or conversion and (ii) “Historical Fair Market Value” means the volume weighted average
price of the Common Stock during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Common Stock
trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights. No shares of Common Stock shall be
issued at less than their par value.
4.1.2. Extraordinary Dividends. If the Company, at any time while the Warrants are outstanding and unexpired, pays to all or
substantially all of the holders of the Common Stock a dividend or makes a distribution in cash, securities or other assets on account of such shares of
Common Stock (or other shares into which the Warrants are convertible), other than (a) as described in subsection 4.1.1 above, (b) Ordinary Cash
Dividends (as defined below), (c) to satisfy the redemption rights of the holders of the Common Stock in connection with a proposed initial Business
Combination, (d) to satisfy the redemption rights of the holders of the Common Stock in connection with a stockholder vote to amend the Charter (i) to
modify the substance or timing of the Company’s obligation to redeem 100% of the Company’s public shares if it does not complete its initial Business
Combination within the period set forth in the Charter, or (ii) with respect to any other material provision relating to the rights of holders of Common Stock
or pre-initial Business Combination activity or (e) in connection with the redemption of public shares upon the failure of the Company to complete its
initial Business Combination and any subsequent distribution of its assets upon its liquidation (any such non-excluded event being referred to herein as an
“Extraordinary Dividend”), then the Warrant Price shall be decreased, effective immediately after the effective date of such Extraordinary Dividend, by the
amount of cash and/or the fair market value (as determined by the Company’s board of directors (the “Board”), in good faith) of any securities or other
assets paid on each share of Common Stock in respect of such Extraordinary Dividend. For purposes of this subsection 4.1.2, “Ordinary Cash Dividends”
means any cash dividend or cash distribution which, when combined on a per share basis, with the per share amounts of all other cash dividends and cash
distributions paid on the shares of Common Stock during the 365-day period ending on the date of declaration of such dividend or distribution to the extent
it does not exceed $0.50 (which amount shall be adjusted to appropriately reflect any of the events referred to in other subsections of this Section 4 and
excluding cash dividends or cash distributions that resulted in an adjustment to the Warrant Price or to the number of shares of Common Stock issuable on
exercise of each Warrant).
4.2. Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 4.6 hereof, the number of issued and
outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or
other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares
of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in issued and outstanding shares of Common
Stock.
4.3. Adjustments in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants
is adjusted, as provided in subsection 4.1.1 or Section 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price
immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the
exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so
purchasable immediately thereafter.
4.4. Raising of the Capital in Connection with the Initial Business Combination. If (x) the Company issues additional shares of
Common Stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or
effective issue price of less than $9.20 per share of Common Stock (with such issue price or effective issue price to be determined in good faith by the
Board and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any shares of Class B Common Stock (as defined
below), par value $0.0001 per share, of the Company held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued
Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the
funding of the Company’s initial Business Combination on the date of the completion of the Company’s initial Business Combination (net of redemptions),
and (z) the volume-weighted average trading price of the Common Stock during the twenty (20) trading day period starting on the trading day prior to the
day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the Warrant Price
shall be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption
trigger price described in Section 6.1 and Section 6.2 hereof shall be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value
and the Newly Issued Price and the $10.00 per share redemption
trigger price described in Section 6.2 shall be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
4.5. Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the issued and outstanding
shares of Common Stock (other than a change under Section 4.1 or Section 4.2 hereof or that solely affects the par value of such shares of Common Stock),
or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and that does not result in any reclassification or reorganization of the issued and outstanding shares of Common Stock), or in
the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an
entirety in connection with which the Company is dissolved, the holders of the Warrants shall thereafter have the right to purchase and receive, upon the
basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares or stock or other securities or property
(including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer,
that the holder of the Warrants would have received if such holder had exercised his, her or its Warrant(s) immediately prior to such event (the “Alternative
Issuance”); provided, however, that (i) if the holders of the Common Stock were entitled to exercise a right of election as to the kind or amount of
securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets constituting the
Alternative Issuance for which each Warrant shall become exercisable shall be deemed to be the weighted average of the kind and amount received per
share by the holders of the Common Stock in such consolidation or merger that affirmatively make such election, and (ii) if a tender, exchange or
redemption offer shall have been made to and accepted by the holders of the Common Stock (other than a tender, exchange or redemption offer made by
the Company in connection with redemption rights held by stockholders of the Company as provided for in the Charter or as a result of the redemption of
shares of Common Stock by the Company if a proposed initial Business Combination is presented to the stockholders of the Company for approval) under
circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of
Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of
Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the
meaning of Rule 13d-3 under the Exchange Act) more than 50% of the issued and outstanding shares of Common Stock, the holder of a Warrant shall be
entitled to receive as the Alternative Issuance, the highest amount of cash, securities or other property to which such holder would actually have been
entitled as a stockholder if such Warrant holder had exercised the Warrant prior to the expiration of such tender or exchange offer, accepted such offer and
all of the Common Stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the
consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in this Section 4; provided further that if
less than 70% of the consideration receivable by the holders of the Common Stock in the applicable event is payable in the form of common stock in the
successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for
trading or quoted immediately following such event, and if the Registered Holder properly exercises the Warrant within thirty (30) days following the
public disclosure of the consummation of such applicable event by the Company pursuant to a Current Report on Form 8-K filed with the Commission, the
Warrant Price shall be reduced by an amount (in dollars) equal to the difference of (i) the Warrant Price in effect prior to such reduction minus (ii) (A) the
Per Share Consideration (as defined below) (but in no event less than zero) minus (B) the Black-Scholes Warrant Value (as defined below). The “Black-
Scholes Warrant Value” means the value of a Warrant immediately prior to the consummation of the applicable event based on the Black-Scholes Warrant
Model for a Capped American Call on Bloomberg Financial Markets (assuming zero dividends) (“Bloomberg”). For purposes of calculating such amount,
(i) Section 6 of this Agreement shall be taken into account, (ii) the price of each share of Common Stock shall be the volume weighted average price of the
Common Stock during the ten (10) trading day period ending on the trading day prior to the effective date of the applicable event, (iii) the assumed
volatility shall be the 90 day volatility obtained from the HVT function on Bloomberg determined as of the trading day immediately prior to the day of the
announcement of the applicable event and (iv) the assumed risk-free interest rate shall correspond to the U.S. Treasury rate for a period equal to the
remaining term of the Warrant. “Per Share Consideration” means (i) if the consideration paid to holders of the Common Stock consists exclusively of
cash, the amount of such cash per share of Common Stock, and (ii) in all other cases, the volume weighted average price of the Common Stock as reported
during the ten (10) trading day period ending on the trading day prior to the effective date of the applicable event. If any reclassification or reorganization
also results in a change in shares of Common Stock covered by subsection 4.1.1, then such adjustment shall be made pursuant to
subsection 4.1.1 or Sections 4.2, 4.3, 4.4 and this Section 4.5. The provisions of this Section 4.5 shall similarly apply to successive reclassifications,
reorganizations, mergers or consolidations, sales or other transfers. In no event shall the Warrant Price be reduced to less than the par value per share
issuable upon exercise of such Warrant.
4.6. Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares of Common Stock issuable
upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares of Common Stock purchasable at such price upon the exercise of a Warrant,
setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5, the Company shall give written notice of the occurrence of such event to each holder of a Warrant, at the last address set
forth for such holder in the Warrant Register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of such event.
4.7. No Fractional Shares. Notwithstanding any provision contained in this Agreement to the contrary, the Company shall not issue
fractional shares of Common Stock upon the exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any
Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round down
to the nearest whole number the number of shares of Common Stock to be issued to such holder.
4.8. Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants
issued after such adjustment may state the same Warrant Price and the same number of shares of Common Stock as is stated in the Warrants initially issued
pursuant to this Agreement; provided, however, that the Company may at any time in its sole discretion make any change in the form of Warrant that the
Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant or otherwise, may be in the form as so changed.
5. Transfer and Exchange of Warrants.
5.1. Registration of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the
Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant
shall be cancelled by the Warrant Agent. In the case of certificated Warrants, the Warrants so cancelled shall be delivered by the Warrant Agent to the
Company from time to time upon request.
5.2. Procedure for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, together with a written request for
exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the Registered Holder of
the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that except as otherwise provided herein or with
respect to any Book-Entry Warrant, each Book-Entry Warrant may be transferred only in whole and only to the Depositary, to another nominee of the
Depositary, to a successor depository, or to a nominee of a successor depository; provided further, however that in the event that a Warrant surrendered for
transfer bears a restrictive legend (as in the case of the Private Placement Warrants), the Warrant Agent shall not cancel such Warrant and issue new
Warrants in exchange thereof until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and
indicating whether the new Warrants must also bear a restrictive legend.
5.3. Fractional Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which shall result
in the issuance of a warrant certificate or book-entry position for a fraction of a warrant, except as part of the Units.
5.4. Service Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.
5.5. Warrant Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance
with the terms of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by
the Warrant Agent, shall supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.
5.6. Transfer of Warrants. Prior to the Detachment Date, the Public Warrants may be transferred or exchanged only together with the
Unit in which such Warrant is included, and only for the purpose of effecting, or in conjunction with, a transfer or exchange of such Unit. Furthermore,
each transfer of a Unit on the register relating to
such Units shall operate also to transfer the Warrants included in such Unit. Notwithstanding the foregoing, the provisions of this Section 5.6 shall have no
effect on any transfer of Warrants on and after the Detachment Date.
6. Redemption.
6.1. Redemption of Warrants for Cash. Subject to Section 6.5 hereof, not less than all of the outstanding Warrants may be redeemed, at
the option of the Company, at any time during the Exercise Period, at the office of the Warrant Agent, upon notice to the Registered Holders of the
Warrants, as described in Section 6.3 below, at a Redemption Price of $0.01 per Warrant, provided that (a) the Reference Value equals or exceeds $18.00
per share (subject to adjustment in compliance with Section 4 hereof) and (b) there is an effective registration statement covering the issuance of the shares
of Common Stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, available throughout the 30-day Redemption Period (as
defined in Section 6.3 below).
6.2. Redemption of Warrants for Shares of Common Stock. Subject to Section 6.5 hereof, not less than all of the outstanding Warrants
may be redeemed, at the option of the Company, at any time during the Exercise Period, at the office of the Warrant Agent, upon notice to the Registered
Holders of the Warrants, as described in Section 6.3 below, at a Redemption Price of $0.10 per Warrant, provided that (i) the Reference Value equals or
exceeds $10.00 per share (subject to adjustment in compliance with Section 4 hereof) and (ii) if the Reference Value is less than $18.00 per share (subject
to adjustment in compliance with Section 4 hereof), the Private Placement Warrants are also concurrently called for redemption on the same terms as the
outstanding Public Warrants. During the 30-day Redemption Period in connection with a redemption pursuant to this Section 6.2, Registered Holders of the
Warrants may elect to exercise their Warrants on a “cashless basis” pursuant to subsection 3.3.1 and receive a number of shares of Common Stock
determined by reference to the table below, based on the Redemption Date (calculated for purposes of the table as the period to expiration of the Warrants)
and the “Redemption Fair Market Value” (as such term is defined in this Section 6.2) (a “Make-Whole Exercise”). Solely for purposes of this Section 6.2,
the “Redemption Fair Market Value” shall mean the volume weighted average price of the shares of Common Stock for the ten (10) trading days
immediately following the date on which notice of redemption pursuant to this Section 6.2 is sent to the Registered Holders. In connection with any
redemption pursuant to this Section 6.2, the Company shall provide the Registered Holders with the Redemption Fair Market Value no later than one (1)
Business Day after the ten (10) trading day period described above ends.
Redemption Fair Market Value of Class A Common Stock (period to expiration of warrants)
10
≤10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
≥18.00
0.261
0.257
0.252
0.246
0.241
0.235
0.228
0.221
0.213
0.205
0.196
0.185
0.173
0.161
0.146
0.130
0.111
0.090
0.065
0.034
—
0.281
0.277
0.272
0.268
0.263
0.258
0.252
0.246
0.239
0.232
0.224
0.214
0.204
0.193
0.179
0.164
0.146
0.125
0.099
0.065
—
0.297
0.294
0.291
0.287
0.283
0.279
0.274
0.269
0.263
0.257
0.250
0.242
0.233
0.223
0.211
0.197
0.181
0.162
0.137
0.104
0.042
0.311
0.310
0.307
0.304
0.301
0.298
0.294
0.290
0.285
0.280
0.274
0.268
0.260
0.252
0.242
0.230
0.216
0.199
0.178
0.150
0.115
0.324
0.324
0.322
0.320
0.317
0.315
0.312
0.309
0.305
0.301
0.297
0.291
0.285
0.279
0.271
0.262
0.250
0.237
0.219
0.197
0.179
0.337
0.337
0.335
0.333
0.332
0.330
0.328
0.325
0.323
0.320
0.316
0.313
0.308
0.304
0.298
0.291
0.282
0.272
0.259
0.243
0.233
0.348
0.348
0.347
0.346
0.344
0.343
0.342
0.340
0.339
0.337
0.335
0.332
0.329
0.326
0.322
0.317
0.312
0.305
0.296
0.286
0.281
0.358
0.358
0.357
0.357
0.356
0.356
0.355
0.354
0.353
0.352
0.351
0.350
0.348
0.347
0.345
0.342
0.339
0.336
0.331
0.326
0.323
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
0.361
Redemption
Date
60 months
57 months
54 months
51 months
48 months
45 months
42 months
39 months
36 months
33 months
30 months
27 months
24 months
21 months
18 months
15 months
12 months
9 months
6 months
3 months
0 months
The exact Redemption Fair Market Value and Redemption Date may not be set forth in the table above, in which case, if the Redemption Fair
Market Value is between two values in the table or the Redemption Date is between two redemption dates in the table, the number of shares of Common
Stock to be issued for each Warrant exercised in a Make-Whole Exercise shall be determined by a straight-line interpolation between the number of shares
set forth for the higher and lower Redemption Fair Market Values and the earlier and later redemption dates, as applicable, based on a 365- or 366-day year,
as applicable.
The share prices set forth in the column headings of the table above shall be adjusted as of any date on which the number of shares issuable upon
exercise of a Warrant or the Exercise Price is adjusted pursuant to Section 4 hereof. If the number of shares issuable upon exercise of a Warrant is adjusted
pursuant to Section 4 hereof, the adjusted share prices in the column headings shall equal the share prices immediately prior to such adjustment, multiplied
by a fraction, the numerator of which is the number of shares deliverable upon exercise of a Warrant immediately prior to such adjustment and the
denominator of which is the number of shares deliverable upon exercise of a Warrant as so adjusted. The number of shares in the table above shall be
adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a Warrant. If the Exercise Price of a warrant is
adjusted, (a) in the case of an adjustment pursuant to Section 4.4 hereof, the adjusted share prices in the column headings shall equal the share prices
immediately prior to such adjustment multiplied by a fraction, the numerator of which is the higher of the Market Value and the Newly Issued Price and the
denominator of which is $10.00 and (b) in the case of an adjustment pursuant to Section 4.1.2 hereof, the adjusted share prices in the column headings shall
equal the share prices immediately prior to such adjustment less the decrease in the Exercise Price pursuant to such Exercise Price adjustment. In no event
shall the number of shares issued in connection with a Make-Whole Exercise exceed 0.361 shares of Common Stock per Warrant (subject to adjustment)
6.3. Date Fixed for, and Notice of, Redemption; Redemption Price; Reference Value. In the event that the Company elects to redeem
the Warrants pursuant to Sections 6.1 or 6.2 above, the Company shall fix a date for the redemption (the “Redemption Date”). Notice of redemption shall
be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the Redemption Date (the “30-day Redemption
Period”) to the Registered Holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed
in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Registered Holder received such notice. As used
in this Agreement, (a) “Redemption Price” shall mean the price per Warrant at which any Warrants are redeemed pursuant to Sections 6.1 or 6.2 and (b)
“Reference Value” shall mean the last reported sales price of the shares of Common Stock for any twenty (20) trading days within the thirty (30) trading-
day period ending on the third trading day prior to the date on which notice of the redemption is given.
6.4. Exercise After Notice of Redemption. The Warrants may be exercised, for cash (or on a “cashless basis” in accordance with
Section 6.2 of this Agreement) at any time after notice of redemption shall have been given by the Company pursuant to Section 6.3 hereof and prior to the
Redemption Date. On and after the Redemption Date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the
Warrants, the Redemption Price.
6.5. Exclusion of Private Placement Warrants. The Company agrees that (a) the redemption rights provided in Section 6.1 hereof shall
not apply to the Private Placement Warrants if at the time of the redemption such Private Placement Warrants continue to be held by a Purchaser or its
Permitted Transferees and (b) if the Reference Value equals or exceeds $18.00 per share (subject to adjustment in compliance with Section 4 hereof), the
redemption rights provided in Section 6.2 hereof shall not apply to the Private Placement Warrants if at the time of the redemption such Private Placement
Warrants continue to be held by either Purchaser or its Permitted Transferees, as applicable. However, once such Private Placement Warrants are transferred
(other than to Permitted Transferees in accordance with Section 2.6 hereof), the Company may redeem the Private Placement Warrants pursuant to Section
6.1 or 6.2 hereof, provided that the criteria for redemption are met, including the opportunity of the holder of such Private Placement Warrants to exercise
the Private Placement Warrants prior to redemption pursuant to Section 6.4 hereof. Private Placement Warrants that are transferred to persons other than
Permitted Transferees shall upon such transfer cease to be Private Placement Warrants and shall become Public Warrants under this Agreement, including
for purposes of Section 9.8 hereof.
7. Other Provisions Relating to Rights of Holders of Warrants.
7.1. No Rights as Stockholder. A Warrant does not entitle the Registered Holder thereof to any of the rights of a stockholder of the
Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to
receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter.
7.2. Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the
Warrant Agent may on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such
new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant
shall be at any time enforceable by anyone.
shares of Common Stock that shall be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.
7.3. Reservation of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued
7.4. Registration of Common Stock; Cashless Exercise at Company’s Option.
7.4.1. Registration of the Common Stock. The Company agrees that as soon as practicable, but in no event later than fifteen
(15) Business Days after the closing of its initial Business Combination, it shall use its best efforts to file with the Commission a registration statement for
the registration, under the Securities Act, of the shares of Common Stock issuable upon exercise of the Warrants. The Company shall use its best efforts to
cause the same to become effective within sixty (60) Business Days following the closing of its initial Business Combination and to maintain the
effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the Warrants in accordance with
the provisions of this Agreement. If any such registration statement has not been declared effective by the sixtieth (60th) Business Day following the
closing of the Business Combination, holders of the Warrants shall have the right, during the period beginning on the sixty-first (61st) Business Day after
the closing of the Business Combination and ending upon such registration statement being declared effective by the Commission, and during any other
period when the Company shall fail to have maintained an effective registration statement covering the issuance of the shares of Common Stock issuable
upon exercise of the Warrants, to exercise such Warrants on a “cashless basis,” by exchanging the Warrants (in accordance with Section 3(a)(9) of the
Securities Act or another exemption) for that number of shares of Common Stock equal to the lesser of (A) the quotient obtained by dividing (x) the
product of the number of shares of Common Stock underlying the Warrants, multiplied by the excess of the “Fair Market Value” (as defined below) less the
Warrant Price by (y) the Fair Market Value and (B) 0.361. Solely for purposes of this subsection 7.4.1, “Fair Market Value” shall mean the volume-
weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the date that notice of
exercise is received by the Warrant Agent from the holder of such Warrants or its securities broker or intermediary. The date that notice of “cashless
exercise” is received by the Warrant Agent shall be conclusively determined by the Warrant Agent. In connection with the “cashless exercise” of a Public
Warrant, the Company shall, upon request, provide the Warrant Agent with an opinion of counsel for the Company (which shall be an outside law firm with
securities law experience) stating that (i) the exercise of the Warrants on a “cashless basis” in accordance with this subsection 7.4.1 is not required to be
registered under the Securities Act and (ii) the shares of Common Stock issued upon such exercise shall be freely tradable under United States federal
securities laws by anyone who is not an affiliate (as such term is defined in Rule 144 under the Securities Act) of the Company and, accordingly, shall not
be required to bear a restrictive legend. Except as provided in subsection 7.4.2, for the avoidance of doubt, unless and until all of the Warrants have been
exercised or have expired, the Company shall continue to be obligated to comply with its registration obligations under the first three sentences of this
subsection 7.4.1.
7.4.2. Cashless Exercise at Company’s Option. If the Common Stock is at the time of any exercise of a Public Warrant not
listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the
Company may, at its option, (i) require holders of Public Warrants who exercise Public Warrants to exercise such Public Warrants on a “cashless basis” in
accordance with Section 3(a)(9) of the Securities Act as described in subsection 7.4.1 above and (ii) in the event the Company so elects, the Company shall
(x) not be required to file or maintain in effect a registration statement for the registration, under the Securities Act, of the shares of Common Stock
issuable upon exercise of the Warrants, notwithstanding anything in this Agreement to the contrary, and (y) use its commercially reasonable efforts to
register or qualify for sale the shares of Common Stock issuable upon exercise of the Public Warrant under applicable blue sky laws to the extent an
exemption is not available.
8. Concerning the Warrant Agent and Other Matters.
Company or the Warrant Agent in respect of the issuance or delivery of shares of
8.1. Payment of Taxes. The Company shall from time to time promptly pay all taxes and charges that may be imposed upon the
Common Stock upon the exercise of the Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such
shares of Common Stock.
8.2. Resignation, Consolidation, or Merger of Warrant Agent.
8.2.1. Appointment of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign
its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of
the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in
place of the Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of
such resignation or incapacity by the Warrant Agent or by the holder of a Warrant (who shall, with such notice, submit his, her or its Warrant for inspection
by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the
appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such court,
shall be a corporation or other entity organized and existing under the laws of the State of New York, in good standing and having its principal office in the
Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or
examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities,
duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed;
but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an
instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon
request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and
effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.
8.2.2. Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall
give notice thereof to the predecessor Warrant Agent and the Transfer Agent for the Common Stock not later than the effective date of any such
appointment.
8.2.3. Merger or Consolidation of Warrant Agent. Any entity into which the Warrant Agent may be merged or with which it
may be consolidated or any entity resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant
Agent under this Agreement without any further act.
8.3. Fees and Expenses of Warrant Agent.
8.3.1. Remuneration. The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such
Warrant Agent hereunder and shall, pursuant to its obligations under this Agreement, reimburse the Warrant Agent upon demand for all expenditures that
the Warrant Agent may reasonably incur in the execution of its duties hereunder.
8.3.2. Further Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed,
executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for
the carrying out or performing of the provisions of this Agreement.
8.4. Liability of Warrant Agent.
8.4.1. Reliance on Company Statement. Whenever in the performance of its duties under this Agreement, the Warrant Agent
shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a
statement signed by the Chief Executive Officer or Chairman of the Board of the Company and delivered to the Warrant Agent. The Warrant Agent may
rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.
8.4.2. Indemnity. The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct, fraud
or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, out-of-pocket
costs and reasonable outside counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement, except as a result of the
Warrant Agent’s gross negligence, willful misconduct, fraud or bad faith.
8.4.3. Exclusions. The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with
respect to the validity or execution of any Warrant (except its countersignature thereof). The Warrant Agent shall not be responsible for any breach by the
Company of any covenant or condition
contained in this Agreement or in any Warrant. The Warrant Agent shall not be responsible to make any adjustments required under the provisions of
Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require
any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any
shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common Stock shall, when issued, be valid
and fully paid and nonassessable.
8.5. Acceptance of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the
same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and
concurrently account for, and pay to the Company, all monies received by the Warrant Agent for the purchase of shares of Common Stock through the
exercise of the Warrants.
8.6. Waiver. The Warrant Agent has no right of set-off or any other right, title, interest or claim of any kind (“Claim”) in, or to any
distribution of, the Trust Account (as defined in that certain Investment Management Trust Agreement, dated as of the date hereof, by and between the
Company and Continental Stock Transfer & Trust Company as trustee thereunder) and hereby agrees not to seek recourse, reimbursement, payment or
satisfaction for any Claim against the Trust Account for any reason whatsoever. The Warrant Agent hereby waives any and all Claims against the Trust
Account and any and all rights to seek access to the Trust Account.
15
9. Miscellaneous Provisions.
9.1. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns.
9.2. Notices. Any notice, statement or demand authorized by this Agreement to be given or made by the Warrant Agent or by the
holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or
private courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent), as follows:
CM Life Sciences III Inc.
c/o Corvex Management LP
667 Madison Avenue
New York, NY 10065
Attn: Eli Casdin and Brian Emes
Email: eli@casdincapital.com
Email: bemes@corvexcap.com
with a copy to:
White & Case LLP
1221 Avenue of the Americas
New York, NY 10020
Attn: Joel L. Rubinstein, Esq.
Email: joel.rubinstein@whitecase.com
Any notice, statement or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant
Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five (5)
days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:
Continental Stock Transfer & Trust Company
One State Street, 30th Floor
New York, NY 10004
Attention: Compliance Department
in each case, with copies to:
White & Case LLP
1221 Avenue of the Americas
New York, NY 10020
Attn: Joel L. Rubinstein, Esq.
Email: joel.rubinstein@whitecase.com
and
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue, Suite 1400
Palo Alto, California 94301
Attn: Gregg Noel
Email: gregg.noel@skadden.com
16
9.3. Applicable Law and Exclusive Forum. The validity, interpretation, and performance of this Agreement and of the Warrants shall
be governed in all respects by the laws of the State of New York. The Company hereby agrees that any action, proceeding or claim against it arising out of,
or otherwise based on, this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the
Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive forum for any such action, proceeding or
claim. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Notwithstanding the
foregoing, this Section 9.3 will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the
federal district courts of the United States of America are the sole and exclusive forum
9.4. Persons Having Rights under this Agreement. Nothing in this Agreement shall be construed to confer upon, or give to, any person,
corporation or other entity other than the parties hereto and the Registered Holders of the Warrants any right, remedy, or claim under or by reason of this
Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements
contained in this Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the Registered Holders
of the Warrants.
9.5. Examination of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the
Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the Registered Holder of any Warrant. The Warrant Agent may
require any such holder to submit such holder’s Warrant for inspection by the Warrant Agent.
9.6. Counterparts. This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
9.7. Effect of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect
the interpretation thereof.
9.8. Amendments. This Agreement may be amended by the parties hereto without the consent of any Registered Holder for the
purpose of (i) curing any ambiguity or to correct any mistake, including to conform the provisions hereof to the description of the terms of the Warrants and
this Agreement set forth in the Prospectus, or defective provision contained herein or (ii) adding or changing any provisions with respect to matters or
questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the rights of the
Registered Holders under this Agreement. All other modifications or amendments, including any modification or amendment to increase the Warrant Price
or shorten the Exercise Period and any amendment to the terms of only the Private Placement Warrants, shall require the vote or written consent of the
Registered Holders of 50% of the then-outstanding Public Warrants and, solely with respect to any amendment to the terms of the Private Placement
Warrants or any provision of this Agreement with respect to the Private Placement Warrants, 50% of the then-outstanding Private Placement Warrants.
Notwithstanding the foregoing, the Company may lower the Warrant Price or extend the duration of the Exercise Period pursuant to Sections 3.1 and 3.2,
respectively, without the consent of the Registered Holders.
9.9. Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof
shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and enforceable.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Warrant Agent
By:
/s/ Margaret B. Lloyd
Name: Margaret B. Lloyd
Title: Vice President
CM LIFE SCIENCES III INC.
By:
/s/ Brian Emes
Name: Brian Emes
Title: Chief Financial Officer and Secretary
[Signature Page to Warrant Agreement]
Number
EXHIBIT A
[FACE]
Warrants
THIS WARRANT SHALL BE VOID IF NOT EXERCISED PRIOR TO
THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED FOR
IN THE WARRANT AGREEMENT DESCRIBED BELOW
CM Life Sciences III Inc.
Incorporated Under the Laws of the State of Delaware
Warrant Certificate
CUSIP ________
This Warrant Certificate certifies that , or registered assigns, is the registered holder of warrant(s) (the “Warrants” and each, a “Warrant”) to
purchase shares of Class A common stock, $0.0001 par value (“Class A Common Stock”), of CM Life Sciences III Inc., a Delaware corporation (the
“Company”). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to receive from the
Company that number of fully paid and nonassessable shares of Class A Common Stock as set forth below, at the exercise price (the “Exercise Price”) as
determined pursuant to the Warrant Agreement, payable in lawful money (or through “cashless exercise” as provided for in the Warrant Agreement) of the
United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent referred
to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall
have the meanings given to them in the Warrant Agreement.
Each whole Warrant is initially exercisable for one fully paid and non-assessable share of Class A Common Stock. Fractional shares shall not be
issued upon exercise of any Warrant. If, upon the exercise of Warrants, a holder would be entitled to receive a fractional interest in a share of Class A
Common Stock, the Company shall, upon exercise, round down to the nearest whole number the number of shares of Class A Common Stock to be issued
to the Warrant holder. The number of shares of Class A Common Stock issuable upon exercise of the Warrants is subject to adjustment upon the occurrence
of certain events as set forth in the Warrant Agreement.
The initial Exercise Price per share of Class A Common Stock for any Warrant is equal to $11.50 per share. The Exercise Price is subject to
adjustment upon the occurrence of certain events as set forth in the Warrant Agreement.
Subject to the conditions set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the extent not
exercised by the end of such Exercise Period, such Warrants shall become void. The Warrants may be redeemed, subject to certain conditions, as set forth
in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for
all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. This
Warrant Certificate shall be governed by and construed in accordance with the internal laws of the State of New York.
CM LIFE SCIENCES III INC.
By:
Name:
Title:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Warrant Agent
By:
Name:
Title:
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive
shares of Class A Common Stock and are issued or to be issued pursuant to a Warrant Agreement dated as of April 6, 2021 (the “Warrant Agreement”),
duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant
Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words “holders” or
“holder” meaning the Registered Holders or Registered Holder, respectively) of the Warrants. A copy of the Warrant Agreement may be obtained by the
holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to
them in the Warrant Agreement.
Warrants may be exercised at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of Election to Purchase set forth hereon properly completed
and executed, together with payment of the Exercise Price as specified in the Warrant Agreement (or through “cashless exercise” as provided for in the
Warrant Agreement) at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his, her or its
assignee, a new Warrant Certificate evidencing the number of Warrants not exercised.
Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise
(i) a registration statement covering the issuance of the shares of Class A Common Stock to be issued upon exercise is effective under the Securities Act
and (ii) a prospectus thereunder relating to the shares of Class A Common Stock is current, except through “cashless exercise” as provided for in the
Warrant Agreement.
The Warrant Agreement provides that upon the occurrence of certain events the number of shares of Class A Common Stock issuable upon
exercise of the Warrants set forth on the face hereof may, subject to certain conditions, be adjusted. If, upon exercise of a Warrant, the holder thereof would
be entitled to receive a fractional interest in a share of Class A Common Stock, the Company shall, upon exercise, round down to the nearest whole number
of shares of Class A Common Stock to be issued to the holder of the Warrant.
Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or
by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant
Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a
like number of Warrants.
Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the Registered Holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.
Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Class A Common
Stock and herewith tenders payment for such shares of Class A Common Stock to the order of CM Life Sciences III Inc. (the “Company”) in the amount of
$ in accordance with the terms hereof. The undersigned requests that a certificate for such shares of Class A Common Stock be registered in the name of ,
whose address is and that such shares of Class A Common Stock be delivered to whose address is . If said number of shares of Class A Common Stock is
less than all of the shares of Class A Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the
remaining balance of such shares of Class A Common Stock be registered in the name of , whose address is and that such Warrant Certificate be delivered
to , whose address is
In the event that the Warrant has been called for redemption by the Company pursuant to Section 6.2 of the Warrant Agreement and a holder
thereof elects to exercise its Warrant pursuant to a Make-Whole Exercise, the number of shares of Class A Common Stock that this Warrant is exercisable
for shall be determined in accordance with subsection 3.3.1(c) or Section 6.2 of the Warrant Agreement, as applicable.
In the event that the Warrant is a Private Placement Warrant that is to be exercised on a “cashless” basis pursuant to subsection 3.3.1(c) of the
Warrant Agreement, the number of shares of Class A Common Stock that this Warrant is exercisable for shall be determined in accordance with subsection
3.3.1(c) of the Warrant Agreement.
In the event that the Warrant is to be exercised on a “cashless” basis pursuant to Section 7.4 of the Warrant Agreement, the number of shares of
Class A Common Stock that this Warrant is exercisable for shall be determined in accordance with Section 7.4 of the Warrant Agreement.
In the event that the Warrant may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the number of
shares of Class A Common Stock that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant
Agreement which allows for such cashless exercise and (ii) the holder hereof shall complete the following: The undersigned hereby irrevocably elects to
exercise the right, represented by this Warrant Certificate, through the cashless exercise provisions of the Warrant Agreement, to receive shares of Class A
Common Stock. If said number of shares is less than all of the shares of Class A Common Stock purchasable hereunder (after giving effect to the cashless
exercise), the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Class A Common Stock be
registered in the name of , whose address is and that such Warrant Certificate be delivered to , whose address is .
[Signature Page Follows]
Date: , 20
Signature
(Address)
(Tax Indentification Number)
Signature Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED).
EXHIBIT B
LEGEND
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. IN ADDITION, SUBJECT TO ANY ADDITIONAL LIMITATIONS ON TRANSFER
DESCRIBED IN THE LETTER AGREEMENT BY AND AMONG CM LIFE SCIENCES III INC. (THE “COMPANY”), CMLS HOLDINGS III LLC
AND THE OTHER PARTIES THERETO, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED
PRIOR TO THE DATE THAT IS THIRTY (30) DAYS AFTER THE DATE UPON WHICH THE COMPANY COMPLETES ITS INITIAL BUSINESS
COMBINATION (AS DEFINED IN THE RECITALS OF THE WARRANT AGREEMENT REFERRED TO HEREIN) EXCEPT TO A PERMITTED
TRANSFEREE (AS DEFINED IN SECTION 2 OF THE WARRANT AGREEMENT) WHO AGREES IN WRITING WITH THE COMPANY TO BE
SUBJECT TO SUCH TRANSFER PROVISIONS.
SECURITIES EVIDENCED BY THIS CERTIFICATE AND SHARES OF CLASS A COMMON STOCK OF THE COMPANY ISSUED UPON
EXERCISE OF SUCH SECURITIES SHALL BE ENTITLED TO REGISTRATION RIGHTS UNDER A REGISTRATION AGREEMENT TO BE
EXECUTED BY THE COMPANY.”
List of Subsidiaries of
Revolution Medicines, Inc.
Exhibit 21.1
Name
Warp Drive Bio, Inc.
EQRx, LLC
EQRx UK Limited
EQRx International, Inc.
Verum Norte Therapeutics, Inc.
Jurisdiction of Incorporation or Organization
Delaware
Delaware
England and Wales
Delaware
Delaware
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-270065, No. 333-263098, No.333-253791, No.
333-236493) and Form S-3 (No. 333-253790) of Revolution Medicines, Inc. of our report dated February 26, 2024 relating to the financial statements and
the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 26, 2024
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark A. Goldsmith, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Revolution Medicines, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: February 26, 2024
By:
/s/ Mark A. Goldsmith
Mark A. Goldsmith, M.D., Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jack Anders, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Revolution Medicines, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: February 26, 2024
By:
/s/ Jack Anders
Jack Anders
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Revolution Medicines, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2023 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of
2002, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: February 26, 2024
By:
/s/ Mark A. Goldsmith
Mark A. Goldsmith, M.D., Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Revolution Medicines, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2023 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of
2002, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: February 26, 2024
By:
/s/ Jack Anders
Jack Anders
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 97
REVOLUTION MEDICINES, INC. POLICY FOR RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
Revolution Medicines, Inc. (the “Company”) has adopted this Policy for Recovery of Erroneously Awarded
Compensation (the “Policy”), effective as of November 17, 2023 (the “Effective Date”). Capitalized terms used in this Policy
but not otherwise defined herein are defined in Section 11 of this Policy.
1.
Persons Subject to Policy
This Policy shall apply to current and former Officers of the Company. Each Officer shall be required to sign an
acknowledgment pursuant to which such Officer will agree to be bound by the terms of, and comply with, this Policy; however,
any Officer’s failure to sign any such acknowledgment shall not negate the application of this Policy to the Officer.
2. Compensation Subject to Policy
This Policy shall apply to Incentive-Based Compensation received on or after the Effective Date. For purposes of this
Policy, the date on which Incentive-Based Compensation is “received” shall be determined under the Applicable Rules, which
generally provide that Incentive-Based Compensation is “received” in the Company’s fiscal period during which the relevant
Financial Reporting Measure is attained or satisfied, without regard to whether the grant, vesting or payment of the Incentive-
Based Compensation occurs after the end of that period.
3. Recovery of Compensation
In the event that the Company is required to prepare a Restatement, the Company shall recover, reasonably promptly, the
portion of any Incentive-Based Compensation that is Erroneously Awarded Compensation, unless the Committee has determined
that recovery would be Impracticable. Recovery shall be required in accordance with the preceding sentence regardless of
whether the applicable Officer engaged in misconduct or otherwise caused or contributed to the requirement for the Restatement
and regardless of whether or when restated financial statements are filed by the Company. For clarity, the recovery of
Erroneously Awarded Compensation under this Policy will not give rise to any person’s right to voluntarily terminate
employment for “good reason,” or due to a “constructive termination” (or any similar term of like effect) under any plan,
program or policy of or agreement with the Company or any of its affiliates.
4. Manner of Recovery; Limitation on Duplicative Recovery
The Committee shall, in its sole discretion, determine the manner of recovery of any Erroneously Awarded
Compensation, which may include, without limitation, reduction or cancellation by the Company or an affiliate of the Company
of Incentive-Based Compensation or Erroneously Awarded Compensation, reimbursement or repayment by any person subject to
this Policy of the Erroneously Awarded Compensation, and, to the extent permitted by law, an offset
1
of the Erroneously Awarded Compensation against other compensation payable by the Company or an affiliate of the Company
to such person. Notwithstanding the foregoing, unless otherwise prohibited by the Applicable Rules, to the extent this Policy
provides for recovery of Erroneously Awarded Compensation already recovered by the Company pursuant to Section 304 of the
Sarbanes-Oxley Act of 2002 or Other Recovery Arrangements, the amount of Erroneously Awarded Compensation already
recovered by the Company from the recipient of such Erroneously Awarded Compensation may be credited to the amount of
Erroneously Awarded Compensation required to be recovered pursuant to this Policy from such person.
5. Administration
This Policy shall be administered, interpreted and construed by the Committee, which is authorized to make all
determinations necessary, appropriate or advisable for such purpose. The Board of Directors of the Company (the “Board”) may
re-vest in itself the authority to administer, interpret and construe this Policy in accordance with applicable law, and in such event
references herein to the “Committee” shall be deemed to be references to the Board. Subject to any permitted review by the
applicable national securities exchange or association pursuant to the Applicable Rules, all determinations and decisions made by
the Committee pursuant to the provisions of this Policy shall be final, conclusive and binding on all persons, including the
Company and its affiliates, equityholders and employees. The Committee may delegate administrative duties with respect to this
Policy to one or more directors or employees of the Company, as permitted under applicable law, including any Applicable Rules.
6.
Interpretation
This Policy will be interpreted and applied in a manner that is consistent with the requirements of the Applicable Rules,
and to the extent this Policy is inconsistent with such Applicable Rules, it shall be deemed amended to the minimum extent
necessary to ensure compliance therewith.
7. No Indemnification; No Liability
The Company shall not indemnify or insure any person against the loss of any Erroneously Awarded Compensation
pursuant to this Policy, nor shall the Company directly or indirectly pay or reimburse any person for any premiums for third-party
insurance policies that such person may elect to purchase to fund such person’s potential obligations under this Policy. None of
the Company, an affiliate of the Company or any member of the Committee or the Board shall have any liability to any person as
a result of actions taken under this Policy.
8. Application; Enforceability
Except as otherwise determined by the Committee or the Board, the adoption of this Policy does not limit, and is
intended to apply in addition to, any other clawback, recoupment, forfeiture or similar policies or provisions of the Company or
its affiliates, including any such policies or provisions of such effect contained in any employment agreement, bonus plan,
incentive plan,
2
equity-based plan or award agreement thereunder or similar plan, program or agreement of the Company or an affiliate or
required under applicable law (the “Other Recovery Arrangements”). The remedy specified in this Policy shall not be exclusive
and shall be in addition to every other right or remedy at law or in equity that may be available to the Company or an affiliate of
the Company.
9. Severability
The provisions in this Policy are intended to be applied to the fullest extent of the law; provided, however, to the extent
that any provision of this Policy is found to be unenforceable or invalid under any applicable law, such provision will be applied
to the maximum extent permitted, and shall automatically be deemed amended in a manner consistent with its objectives to the
extent necessary to conform to any limitations required under applicable law.
10. Amendment and Termination
The Board or the Committee may amend, modify or terminate this Policy in whole or in part at any time and from time
to time in its sole discretion. This Policy will terminate automatically when the Company does not have a class of securities listed
on a national securities exchange or association.
11. Definitions
“Applicable Rules” means Section 10D of the Exchange Act, Rule 10D-1 promulgated thereunder, the listing rules of the
national securities exchange or association on which the Company’s securities are listed, and any applicable rules, standards or
other guidance adopted by the Securities and Exchange Commission or any national securities exchange or association on which
the Company’s securities are listed.
“Committee” means the committee of the Board responsible for executive compensation decisions comprised solely of
independent directors (as determined under the Applicable Rules), or in the absence of such a committee, a majority of the
independent directors serving on the Board, which shall initially be the Compensation Committee of the Board.
“Erroneously Awarded Compensation” means the amount of Incentive-Based Compensation received by a current or
former Officer that exceeds the amount of Incentive-Based Compensation that would have been received by such current or
former Officer based on a restated Financial Reporting Measure, as determined on a pre-tax basis in accordance with the
Applicable Rules.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Financial Reporting Measure” means any measure determined and presented in accordance with the accounting
principles used in preparing the Company’s financial statements,
3
and any measures derived wholly or in part from such measures, including GAAP, IFRS and non-GAAP/IFRS financial
measures, as well as stock or share price and total equityholder return.
“GAAP” means United States generally accepted accounting principles.
“IFRS” means international financial reporting standards as adopted by the International Accounting Standards Board.
“Impracticable” means (a) the direct costs paid to third parties to assist in enforcing recovery would exceed the
Erroneously Awarded Compensation; provided that the Company (i) has made reasonable attempts to recover the Erroneously
Awarded Compensation, (ii) documented such attempt(s), and (iii) provided such documentation to the relevant listing exchange
or association, (b) to the extent permitted by the Applicable Rules, the recovery would violate the Company’s home country laws
pursuant to an opinion of home country counsel; provided that the Company has (i) obtained an opinion of home country counsel,
acceptable to the relevant listing exchange or association, that recovery would result in such violation, and (ii) provided such
opinion to the relevant listing exchange or association, or (c) recovery would likely cause an otherwise tax-qualified retirement
plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C.
401(a)(13) or 26 U.S.C. 411(a) and the regulations thereunder.
“Incentive-Based Compensation” means, with respect to a Restatement, any compensation that is granted, earned, or
vested based wholly or in part upon the attainment of one or more Financial Reporting Measures and received by a person: (a)
after beginning service as an Officer; (b) who served as an Officer at any time during the performance period for that
compensation; (c) while the issuer has a class of its securities listed on a national securities exchange or association; and (d)
during the applicable Three-Year Period.
“Officer” means each person who serves as an executive officer of the Company, as defined in Rule 10D‑1(d) under the
Exchange Act.
“Restatement” means an accounting restatement to correct the Company’s material noncompliance with any financial
reporting requirement under securities laws, including restatements that correct an error in previously issued financial statements
(a) that is material to the previously issued financial statements or (b) that would result in a material misstatement if the error
were corrected in the current period or left uncorrected in the current period.
“Three-Year Period” means, with respect to a Restatement, the three completed fiscal years immediately preceding the
date that the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board
action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare such
Restatement, or, if earlier, the date on which a court, regulator or other legally authorized body directs the Company to prepare
such Restatement. The “Three-Year Period” also includes any transition period (that results from a change in the Company’s
fiscal year) within or immediately following the three completed fiscal years identified in the preceding sentence. However, a
transition period
4
between the last day of the Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of
nine to 12 months shall be deemed a completed fiscal year.
5
FORM OF ACKNOWLEDGMENT AND CONSENT TO
POLICY FOR RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
The undersigned has received a copy of the Policy for Recovery of Erroneously Awarded Compensation (the “Policy”) adopted
by Revolution Medicines, Inc. (the “Company”).
For good and valuable consideration, the receipt of which is acknowledged, the undersigned agrees to the terms of the Policy and
agrees that compensation received by the undersigned may be subject to reduction, cancellation, forfeiture and/or recoupment to
the extent necessary to comply with the Policy, notwithstanding any other agreement to the contrary. The undersigned further
acknowledges and agrees that the undersigned is not entitled to indemnification in connection with any enforcement of the Policy
and expressly waives any rights to such indemnification under the Company’s organizational documents or otherwise.
___________________
________________________________________
Date
Signature
________________________________________
Name
________________________________________
Title
1